Standing Committee H

[Mr. Jimmy Hood in the Chair]

Higher Education Bill

Clause 23 - Condition that may be required to be imposed by English funding bodies

Amendment proposed [this day]: No. 82, in 
clause 23, page 9, line 7, leave out paragraph (a).—[Mrs. Anne Campbell.] 
 Question again proposed, That the amendment be made.

Jimmy Hood: I remind the Committee that with this we are discussing the following a amendments:
 No. 3, in 
clause 23, page 9, line 10, leave out 'the higher amount' and insert 
 '£3,000, increased annually on 1st April, in line with the Retail Price Index'. 
No. 144, in 
clause 23, page 9, line 11, at end insert 
 'but which can increase by a minimum of 0.5 per cent. above the rate of the retail price index in each academic year.'. 
No. 223, in 
clause 23, page 9, line 11, at end insert 
 'and that at least 10 per cent. of its fee income is supplied for distribution amongst institutions, as directed by the Secretary of State'. 
No. 239, in 
clause 23, page 9, line 11, at end insert 
 'and that there is provision to students, as directed by the Secretary of State, of a bursary equivalent to at least 10 per cent. of the fee, or £300, whichever is the greater sum'. 
No. 83, in 
clause 23, page 9, line 13, leave out from 'period' to 'institution' in line 15. 
No. 84, in 
clause 23, page 9, line 26, leave out paragraph (a). 
No. 85, in 
clause 23, page 10, leave out lines 30 and 31. 
No. 120, in 
clause 23, page 10, line 30, leave out from 'means' to end of line 31 and insert 
 '£3,000, increased annually on 1st April in line with the Retail Price Index'. 
No. 110, in 
clause 23, page 10, line 35, at end insert 
 'but excludes any year of education beyond the first three years of a course in medicine, veterinary medicine or education'. 
No. 86, in 
clause 24, page 10, line 44, leave out 'and the higher amount'. 
No. 87, in 
clause 24, page 10, line 48, leave out 'and the higher amount'. 
 No. 88, in
clause 24, page 11, line 1, leave out 'either of those amounts' and insert 'that amount'. 
No. 89, in 
clause 26, page 11, line 26, leave out paragraph (a). 
No. 225, in 
clause 26, page 11, line 30, at end insert 
 'and that at least 10 per cent. of its fee income is supplied for distribution amongst institutions as directed by the Secretary of State.'. 
No. 240, in 
clause 26, page 11, line 30, at end insert 
 'and that there is provision to students, as directed by the Secretary of State, of a bursary equivalent to at least 10 per cent. of the fee, or £300, whichever is the greater sum'. 
No. 252, in 
clause 26, page 11, line 30, at end insert 
 'but which can increase by a minimum of 0.5 per cent. above the rate of the retail price index in each academic year.'. 
No. 90, in 
clause 26, page 11, line 32, leave out from 'period' to 'institution' in line 34. 
No. 91, in 
clause 26, page 12, leave out lines 33 and 34. 
No. 121, in 
clause 26, page 12, line 33, leave out from 'means' to end of line 34 and insert 
 '£3,000, increased annually on 1st April in line with the Retail Price Index'. 
No. 92, in 
clause 31, page 14, line 5, leave out subsection (1). 
No. 93, in 
clause 31, page 14, line 10, leave out 'also'. 
No. 94, in 
clause 31, page 14, leave out lines 39 to 43. 
No. 95, in 
clause 35, page 16, line 4, leave out '(a) or'. 
No. 96, in 
clause 36, page 16, line 23, leave out '(a) or'.

Graham Allen: It is nice to be back under your chairmanship, Mr. Hood. We got a little soft this morning and colleagues were interrupting me for all sorts of spurious reasons as I was trying to speak to the amendments.
 I should like to start the proceedings by apologising to the Conservative Front Bench spokesman. I mistakenly said that his party's policies would cause 410,000 students not to go to university. However, I have looked at my source again: Professor Crewe of Universities UK referred to a study of the Higher Education Policy Institute, in which he said that 214,000 student places would be lost due to the loss of income to universities. Additionally, 180,000 to 250,000 places would be lost due to demographic changes. I apologise—the figure was not 410,000. It was up to 464,000, and I am glad to correct the record. 
 We were discussing markets and my amendment No. 144. I should make it clear that in moving the amendment, I am not, as one colleague suggested earlier, espousing a market, but recognising it. I am recognising the reality of what we must deal with and how we should change it. We could all hold our breath and pass a resolution to wish away the market, and wish that we lived in a sort of nirvana, but that would 
 not make a blind bit of difference. We must intervene and regulate, as I am proposing in amendment No. 144, to ensure that what we currently have—a massively imperfect market—is improved, and works for people whom we are here to safeguard.

Hywel Francis: Would my hon. Friend agree that we should not be using the word ''market'' at all to describe the present situation? It is more like a cartel.

Graham Allen: There are many ways to describe it, and perhaps cartel is the right word, but I shall not stray too far into market theory. It is important that Committee colleagues from all parties understand that we are dealing with a grossly imperfect market. My proposals and the Government package are designed to make that market work better, particularly for those whom Members of all parties represent. We should get as many youngsters as are qualified into the university place that they deserve.

Phil Willis: We can explore the market later, but I should like to press the hon. Gentleman. Taking the example of Nottingham university, which is close to him, can he say what improvements will result from the Bill? How will the current system, which he sees as deeply flawed, be rectified to allow greater access to Nottingham university for students from his constituency?

Graham Allen: I am pleased to have a straight man this afternoon. If we were to do what the hon. Member for Epping Forest (Mrs. Laing) suggested this morning, we could gear our constituents up to qualify properly. It will take time—there is no magic wand. We could put something in the Liberal Democrats' manifesto that would probably solve the situation immediately, but to be realistic, we need to get people qualified so that they can get A-levels. It is no good the hon. Gentleman tutting: we live with this every day. We are trying to raise standards in primary and secondary schools and in further education.
 I was born and bred in my constituency, and I know that my constituents look at the wall around Nottingham university but rarely venture into its nice campus. However, to answer the hon. Gentleman's question directly, instead of having to climb the two mountains of fighting their educational culture and of then having to find their own money to go to university, they will be given a grant of £3,000 or more a year to go the university of their choice if they are qualified. 
 There is a lot more that we can do, and I have tabled amendments to improve access and get the universities into their local communities not merely to recruit students, but to help education at a lower level. There is a great deal that can happen.

David Rendel: I am little confused. When I first read amendment No. 144, I assumed that it proposed that the fees could increase by a maximum of 0.5 per cent. above the rate of the retail prices index, but it actually proposes a minimum
 increase of at least 0.5 per cent. above that rate. In any case, an increase can, rather than must, happen, so it would be either zero or at least 0.5 per cent. above the rate of the retail prices index.

Graham Allen: If I reach amendment No. 144, I will be pleased to deal with that.
 There was debate about intervening in the market, but we are clearly intervening in it by creating a £3,000 a year grant and abolishing up-front fees. Some of us want to go further. I would prefer to replace the current loan rate with a Government rate of interest, which would create another £600 million that could be spent on additional grants. That would also interfere with the market. I want the Select Committee on Education and Skills to consider annually how the new system develops, so it can also make suggestions to change and improve the market. 
 My right hon. Friend the Minister knows about the situation in Australia. If it is true that £13 out of £14 will be paid for by the state, why do we not let students know that fact in the most obvious way by giving them a cheque cashable only at their university? That will mean that they pay that money to the university, as well as their one 14th contribution. 
 Finally, on additions to the market, there is a raft of later amendments about sponsoring individual students and public services helping students through university, in the same way as the Army scheme and others do. There are many ways in which we all want to and will intervene in the market, so let us not have any more nonsense about how we are creating a market where there has not been one before. 
 Amendment No. 144 addresses that point directly. It refers directly to cap on fees, and I make no bones about saying that the best way to cap fee income and levels is to have a tough regulator. That is why I have tabled amendments to strengthen the office for fair access and make it more like Ofsted. It should have teeth and ensure that instead of being merely reactive when a university proposes an increase, it gets stuck in and starts to regulate early on.

George Mudie: I am sorry that I missed an early part of my hon. Friend's contribution, as I enjoyed it this morning. Will he explain how the Bill will help Nottingham's poorest youngsters? As I understand it, Nottingham's poorest youngsters do not pay tuition fees. Under the Bill, such youngsters will receive an increased maintenance grant, but that grant plus the bursary total the £3,000 that the youngsters would have to pay if they were not poor. There is no additional help in the Bill, so I am wondering how it will help the poorest youngsters in our constituencies.

Graham Allen: My amendment will help those youngsters, so I shall explain it carefully. That is why we have a Committee stage—to smoke these things out.
 The youngsters who currently are on very low incomes do not pay fees up front, as my hon. Friend rightly points out. The up-front fee does not apply to them. However, my youngsters in that category are not 
 avoiding university in order not to pay the fees. [Interruption.] It is a different issue; it is about going to university, and my youngsters are put off going to university not by the fact that if they go there is no fee, and certainly not by the fact that if they wish to pay fees under the Government's proposals they can do so at £4.23 a week on earnings of £15,000. The youngsters in Nottingham, North are put off because they cannot afford to go in the first place. 
 Even using my hon. Friend's mathematics for the most expensive course, which costs £3,000 a year and involves repayments of £9,000, surely everyone will understand that getting money up front in order to get to university, and repaying the most modest amounts when earning between £15,000 and £18,000, is a very good deal for the needy. It is not a quid pro quo; it is getting the money when it is needed. That is what we all fought for. So-called rebels and so-called loyalists fought hard to get the Government to restore the grant to the modest level of £1,000, and we have now managed to get it up to £3,000. I give credit to my hon. Friends the Members for Leeds, East (Mr. Mudie) and for Cambridge (Mrs. Campbell) and other colleagues of all views for having restored the grant, which is to help poor youngsters when they need help, and not when they are no longer poor but are graduates starting to earn a good salary.

David Rendel: Will the hon. Gentleman give way?

Graham Allen: I will, but I am conscious of the need to move on.

David Rendel: To some extent, it seems that the hon. Gentleman does not quite understand the system. Under the present system, I understand that the young person about whom he is talking could take out a loan for maintenance that is repayable after graduation. The new system will allow him to take out a grant, which turns into a loan on graduation. He still ends up with the same size loan, which is still repayable on graduation.

Graham Allen: Again, the hon. Gentleman has not benefited from the seminars that a number of us attended prior to Christmas. He confuses grants with fee repayments. I would rather not take more of your time, Mr. Hood, to explain it further. It is not a simple equation between money for grants and money paid back in fees. I explained that as carefully as I could, in response to my hon. Friend the Member for Leeds, East.
 Amendment No. 144 deals with a technical question. It is not merely whether universities should enjoy the freedom to propose the cost of a course: what we do in response to their proposals is entirely another matter. We know that an operation under the NHS costs a certain amount of money. Labour Members would not dream of putting a price tag on it. However, the price of certain operations can be used—it may well be used by Opposition parties—to demand a certain amount of money for such operations in response. The price points are politically neutral. The question is what we do with them.

Mark Francois: Will the hon. Gentleman give way?

Graham Allen: Let me finish my argument, then I shall give way.
 There is also a technical point to the amendment. Economists have observed that the rate of inflation in the public sector is higher than in manufacturing because the scope for productivity gains is far more limited. Relative costs escalate by an estimated 0.5 per cent. per annum, because education has to compete with businesses for the same pool of workers, yet the latter enjoy the benefit of greater productivity gains. Were we to tie universities to £3,000—even if it were justified, according to the standard level of inflation—we would effectively reduce their income year on year. However inadequate the language, amendment No. 144 seeks to deal with that question.

Mark Francois: I appreciate that the hon. Gentleman is seeking not to detain the Committee for too long, but would not amendment No. 144 bust the £3,000 cap?

Graham Allen: It would allow universities to propose fees additional to £3,000. Deciding what we then do with the proposal is why we are all in politics and why we are talking about regulation and social intervention.

Phil Willis: This is crucial. If the amendment referred to a maximum of 0.5 per cent., we would understand its effect, but it refers to
''a minimum of 0.5 per cent.'' 
Does that mean that a university could apply to OFFA for an increase of, say, 95.5 per cent.? That is what it appears to say. Furthermore, has the hon. Gentleman received any guarantee from the Minister that the grant that is equivalent to the fee, which is set at £3,000, would grow at the same time?

Graham Allen: If I had thought that any of my amendments would be accepted, I might have considered them in the same detail as the hon. Gentleman. Sadly, I do not think they will be accepted.
 Amendment No. 223 refers to what I have called an equalisation fund. The hon. Member for Westmorland and Lonsdale (Mr. Collins) seemed to think that that was a novel approach, but it reflects the way in which local government has long worked. Where local authorities receive rate income or other income, an equalisation mechanism assists those that are less well off. I am floating the idea that the income generated by the fee income that the Government will give universities might produce anomalies. We will want to address those, and one way of doing that, which I am floating with the Minister, would be to put 10 per cent. of that fee income into a pool and do what we would do in local government. 
 We could perhaps provide assistance to the modern universities or to those with particular difficulties in a region. We could create a kitty, and people could see how the fee income was being used to equalise some of the worst effects. I shall be interested to hear what my 
 right hon. Friend the Minister has to say about that. Colleagues have raised the issue with him over the past few months, and it might be worth further consideration here or in the other place. 
 Amendment No. 239 would include in the Bill provisions relating to university bursaries. One of the great gains that has emerged during our deliberations on the Bill is that we are not looking to universities to give bursaries for the remission of fees, because we are developing a system whereby people will pay fees only when they are better off, not when they are poor students. It would be nonsense to remit fees when people were earning £15,000, £18,000, £30,000 or £100,000. We are therefore seeking—the universities have generously come into line on this—to ensure that university bursaries will, in future, be aimed at the front end, where youngsters will need the money. However much money is involved, and however much is repaid, youngsters will need the money early, so university bursaries will be paid early. 
 We now agree that that should happen, and the theme recurs in several parts of the Bill, so let us include a provision in the Bill. We should do that for colleagues who are carefully considering the matter and so that we have a coherent Bill. I know about the procedural difficulties and about the problems with parliamentary draftsmen and civil service procedures, and I know that we need to change parts of other Acts and incorporate them in the Bill. Such things might be confusing, so let us ensure that they are not by setting out in the Bill what we propose to do. 
 It would then be far easier to convince those who have heard stories about massive debts, which they think will prevent them from going to university. There is a great deal of confusion about the issues. We can stick the Bill in front of people and tell them that there is a mandatory £300 bursary from the university to those people who need it on top of the £2,700 grant provided by the Government.

Tim Boswell: I have not intervened earlier as I have enjoyed the hon. Gentleman's attempt to clarify the Bill.
 Is it not the case that if the bursary is to be made available by the institution, it will effectively be funded through the fees of other students who are at that institution at the same time? What happens in later life to the students who have paid—even in small measure—for the bursaries of others while they were at university will therefore become a contingent matter. The people who paid at the time for their colleagues may never earn the incomes that those who indirectly benefited from their bursaries attain in later life.

Graham Allen: If those people are not earning a certain amount, they will repay their fees at a lower level. For example, should an individual decide to start a family and leave their job, their repayments will fall to zero. Should someone choose to work in a voluntary capacity or take a lower-paid job, the weekly repayments will drop, commensurate with their earned income. That is an important proposal, and one that
 will help graduates to repay fees only when they are capable of doing so, once they have reached a certain income.

Chris Grayling: That is an enormously important point, to which the hon. Gentleman has referred several times. He must surely understand that the student loan scheme does not involve repayment only when graduates can afford it. It is a deferred interest scheme. In the current year the interest rate is 3.1 per cent. For each year, the interest that graduates are unable to pay on the loan because they are not earning enough is simply added to the principal of the overall loan. It is a deferred interest loan and not one that is repaid only when graduates can afford to do so.

Graham Allen: I have not been talking about student loans or deferred interest loans. I have been talking exclusively about the grants and the fee that is repaid once a graduate earns a specific amount of money. The hon. Gentleman can make his points, but they are not relevant to what I have been saying.
 We should clarify our proposals in the Bill. I do not mean this ungenerously, but none of us should accept the word of vice-chancellors about what they will or will not do on the matter. The proposals should be clearly written in law, ideally in a Bill. I mentioned earlier that vice-chancellors have presided over a system in which only 20 per cent. of working-class youngsters have gone to university. That has been a steady statistic over the past 40 years. With the greatest respect to vice-chancellors, I believe that now is the time that we need to be clear with them about how the new system will work. 
 There are several consequential amendments relating to the situation in Wales. The intention is to ensure that Wales is treated on the same basis as England. 
 Clause 23 is an important part of the Bill. It will give opportunity to the youngsters in my constituency who do not go to university. If they can work hard enough to overcome the educational culture in which they find themselves and get the appropriate qualifications, the clause will enable them—unless the Conservative party were to get in—to obtain a £3,000 grant. Some 65 per cent. of families in my constituency are in that position. 
 I am delighted to see you in the Chair, Mr. Hood, because 42 per cent. of youngsters from families in your constituency will qualify for a full grant—that has brought a smile to your face straight away. I hope Labour Members, whatever the different views about particular aspects of the Bill, will regard that achievement as one of the greatest prizes that a Labour Government have delivered since 1997. I hope that they will do nothing to bring it into question.

David Rendel: I am delighted to have a chance to speak to this group of amendments, because, as the hon. Member for Westmorland and Lonsdale said, they are at the heart both of the Bill and of what we should discuss in the Committee. It is therefore not a surprise that the discussion has taken a bit of time, and I have no doubt that it will take a bit longer yet.
 I shall focus the main part of my remarks on amendment No. 82. My hon. Friend the Member for Harrogate and Knaresborough (Mr. Willis) and I had tabled a similar amendment but found that this amendment had already been tabled by the hon. Member for Cambridge and two other hon. Members. We therefore added our names to the list of supporters of the amendment. I shall comment first on some of the other amendments in the group, and respond to the important contribution from the hon. Member for Nottingham, North (Mr. Allen). 
 Amendment No. 144, which the hon. Member for Nottingham, North mentioned, would mean that there would be no cap on the maximum fee, at least after the first year. Higher education institutions would be able to set whatever fee they liked, as long as they could get it into the plan. The Government have said that there will be a cap, and that that cap will remain throughout the next Parliament at £3,000 plus inflation only. I suppose that if there is to be some sort of higher rate fee, it is better that it should be capped. That is closer to what the Liberal Democrats seek than a non-capped fee. I would prefer to see a cap, and therefore neither my hon. Friend the Member for Harrogate and Knaresborough nor I could support amendment No. 144 as it stands. 
 Amendment No. 110 would limit the charging of fees to three years of a student's course. My hon. Friend and I support the amendment. At present, it is unfair that some students, because of the courses that they choose to take—often courses that the UK badly needs them to take—should be charged higher fees in total because they are charged for four years rather than three. The amendment would restrict the charging of fees so that all those on a normal, full-time course would be charged only for three years. That is why we support it. 
 Before I discuss amendment No. 82, I shall respond to the remarks made by the hon. Member for Nottingham, North. He said that in working towards a new scheme for higher education, it is important that we pay particular attention to the needs of children from poorer families. I fully accept that. We all agree that there has been a failure in the UK to involve sufficient numbers of young people from the poorer parts of the country in higher education. As the hon. Gentleman said, that has led to a huge waste of talent, which the UK can ill afford. We must do something about that. I share the objectives that he was seeking to achieve when he spoke in support of the Bill, and I should be delighted if we could work together in achieving those objectives. Sadly, however, I believe that the scheme that the hon. Gentleman supports will not produce the effect that he expects. We differ not on the objectives, but on the way in which they should be achieved. 
 In particular, the hon. Gentleman praised the new scheme in the Bill, compared with the current scheme. My hon. Friend and I, and other hon. Members, intervened while the hon. Gentleman was speaking to make it clear that we do not believe that the advantages of the new scheme are quite as great as he was making out. The scheme has some advantages: it must be 
 better that people pay after the event, when they graduate, rather than having to pay up front. It must also be better that the payment is based on students' future salaries, once they start earning, rather than on their parents' incomes. Parents should not be responsible for young people beyond the age of 18, so there are advantages to moving to an after-the-event payment. There is also one small way in which payment of the same amount after the event benefits those who receive the grant. 
 As I see it, those who are eligible for the grant will be paid £3,000 in each of the three years as they move through a normal university course that charges the top level of fees. They will receive £3,000 in grant at the beginning and will presumably use that to pay for their maintenance. If they want to, they can salt it away in a bank or building society, earn interest on it and then use it at the end of the period to pay off their £3,000 fees, but we all expect that normally they will use the money to pay their maintenance costs as they go through their university course. 
 When those people have finished their three years and taken their degree, they will end up having taken out a lower maintenance loan than they would have done otherwise, including under the current scheme—lower to the extent of, presumably, £3,000 a year. Therefore, their maintenance loan at the end of that time will be £9,000 in total less than they might have expected. They will probably still have to borrow some money. Most students cannot exist on £3,000 a year, but at the end of that time they will have taken out £9,000 less in maintenance loan than they would otherwise have expected to do. At that point, they will be charged £9,000 in fees, so the loan will be exactly the same as it would have been had they not had the maintenance grant to begin with and had taken out a maintenance loan instead to pay the £3,000 of maintenance each year for three years. 
 Young people will not have to pay interest on the amount during the three years. Of course, if they took out a maintenance loan directly from the student loan scheme, they would not have to pay that interest anyway. Therefore, only those students who took out a loan from elsewhere and had to pay interest on it would gain anything as compared to the current scheme. Otherwise, the situation once people graduate will be in effect exactly the same as it is under the current scheme. They will have had money up front, which they will have used for their maintenance, but they could have had a loan for their maintenance in any case. They will end up with exactly the same debt when they graduate, which they will have to pay off. The way in which they pay it off may be different, but the amount that they have to pay off when they graduate will be the same.

Graham Allen: I followed the hon. Gentleman most of the way, but I got lost at the point of repayment. I am sure that he understands that fees are repaid only when the individual is earning as a graduate. This relates to the exchange that I had with my hon. Friend the Member for Leeds, East. What is the value of money?
 Is £9,000 up front when people need it more valuable to them than £9,000 when that has to be repaid? I use that figure because the hon. Gentleman took the highest possible fee of £3,000. Clearly, money is more valuable to youngsters when they require it most, which is when they need to get into college in the first place.

Jimmy Hood: Order. Before the hon. Member for Newbury (Mr. Rendel) responds, I ask hon. Members to make interventions brief and to the point.

David Rendel: My understanding is that people can have the money up front by way of a maintenance loan or by way of the Government grant under the new scheme. Either way, the money is there; people are not starving. It is just a question of when it is transferred into being a loan as opposed to a grant. Under the new scheme, the money officially becomes a loan when people graduate; up front, it is a grant. In practice, under either scheme, people end up with the same loan and the same debt when they graduate.

George Mudie: As I understand it, the argument is that people will get the normal maintenance loan if they wish, which will give them approximately £9,000 over three years. I want to talk about the advantage for the poorest youngsters. The maintenance grant is made up to £3,000 one way or another. That should pay the fees. If they need it, they can receive £18,000 during their period of study, which is repayable, rather than £1,000 up front and a maintenance grant. Currently the poorest kid would have to find £1,000 and have the capacity for a £9,000 loan. Under the new scheme they will pay nothing up front and have the capacity for an £18,000 loan. That is the advantage as I see it, and it would be interesting if I am told that that is not the way, because that is the only way that makes sense.

David Rendel: The hon. Gentleman has lost me there. Perhaps the Minister would like to answer that question more than I would, as I am not quite clear that I understand it exactly.
 My understanding is that, at the moment, the poorer sections of the population can get fees paid for them, and they can get a maintenance loan to take them through university that they then pay off as a graduate. Under the new scheme the maintenance loan is £9,000 less because that sum is given as a grant, but then the student has to pay fees at the end of their time at university, so the £9,000 loan is added on when they graduate.

Chris Grayling: I congratulate the hon. Gentleman on highlighting the need for improved maths training on the Government Benches. Will he confirm that, compared with the new scheme, the actual cash flow for a less well-off student—the cash in pocket—will be identical? There will be no more money available once fees and loans are taken into account. Furthermore, will he confirm that someone who falls just above the parental threshold, even just £1 above, will have debts of £9,000 more when they leave university?

David Rendel: I am not sure that I understood the last point. The first point seemed to be correct, but I noticed that the Minister was shaking his head. Some Labour Members were indicating from a sedentary position that they did not agree, so I am looking forward to the Minister's explanation. If we are wrong, it is because this matter has never been explained properly in the past.
 Will the Minister explain whether everybody below the threshold for a full £3,000 grant will get that sum, or whether it will be only for those who choose to go on courses where the fee is £3,000? This is an important point and the various booklets that have been issued do not make the position clear. The explanatory document ''Moving Towards A Single Combined Grant for Higher Education'' says that 
''students from the poorest backgrounds on courses charging the full £3,000 fee would still receive at least £3,000''. 
That indicates, but does not say explicitly, that those on courses charging less than the full £3,000 fee will receive a lower grant than £3,000 up front. Does the Minister want to intervene?

Alan Johnson: To intervene all the time when I have the right of reply is a waste of everyone's time, but on this one point, the £300 applies where there is a course that costs more than £2,700, so if there is a course between £2,700 and £3,000, that is when the £300 kicks in. The £2,700 is an up-front non-repayable grant to all students, irrespective of the course that they are on.

David Rendel: It is interesting that the Minister replies that way. There will be enormous pressure on those eligible for the £3,000 grant to take up courses that charge very low fees, or no fees at all. In those cases they will benefit under the new scheme. They will get a grant that is not repayable, as at the end of the day they will not have to repay fees. So, for example, a student who goes on a course where there are no fees payable, but who is from the poorer section of the population where the full grant is available to them, will get apparently an annual £2,700 grant throughout that period that they can spend on maintenance. They will never have to repay that because it is a grant, and they will never have to repay fees because they are on a course that does not charge any. That had not been fully explained before, and it is certainly not what is indicated in the explanatory document. I understand that the Minister thinks that that document is, in that sense, a bit misleading.
 If that is true, those from the poorest backgrounds will have a huge incentive to take the courses that charge lower fees, which will create a great divide among the population. Those students who are under financial pressure will consider going to less prestigious universities that do not charge full-rate fees or taking unpopular courses at universities that have to reduce fees to encourage people to apply. That is precisely what concerns so many Labour Members when they talk about variable fees. 
 I had thought that probably the full grant would be given only when the full fee was charged, and it is interesting to discover that that is not the case. That seems to indicate that Labour Members' worries about variable fees are justified; what they fear will come to fruition because it will be a huge incentive to poorer people to go to less prestigious colleges.

Patrick Hall: When the hon. Gentleman has the opportunity to read his words, he should reflect on what he said, because we are discussing an opportunity for everyone, regardless of background or income, to choose whichever course they are qualified to take. There is a cap on the maximum fee that can be charged, and no one need feel that they could not go to university for financial reasons. The poorest will have access to the grant, and the rest will benefit from the cap and not have to pay the up-front fee. The Bill opens up opportunities, it does not reduce them.

David Rendel: The hon. Gentleman has missed the point about what young people thinking of going to university will be considering. If they are eligible for the full grant from the Government of £3,000 or £2,700, they will be considering how they will end up when they finish their university course. Young people who are eligible for a full grant will say to themselves, ''If I take a course where the charge is £3,000 a year, I will get a full grant and I can either salt it away and use it to pay that amount or use it to reduce my maintenance loan over that time, but I will have to repay the loan at the end of the day. That will mean that I end up owing £3,000 per year, which is equivalent to the fee I am being charged. On the other hand, if I go to a university where no fees are charged, I will still get my £2,700. I can use that to maintain myself during the three years I am there and I will not need an extra loan to pay off my fees at the end of that period. In effect, I will be £8,100 better off at a university that does not charge fees.''
 I suggest to the hon. Gentleman that if I were a young person from an impoverished background I would be sorely tempted to choose the university at which I would end up £8,100 better off.

Tim Boswell: As the hon. Gentleman knows, I am at one with him on the general issue. Does he agree that the Minister's answer, if nothing else, is a remarkable example of inefficient targeting? The Minister is providing grants of up to £3,000 for people in the lower income range, which are predicated on fees of up to £3,000, which in certain cases will not be charged. Will the hon. Gentleman further reflect that if there are two courses in an institution, one of which is at full fees and the other at reduced or zero fees, it will create an odd situation in relation to student support? Some will need it and will get it and others may need it for other reasons, but they will get exactly the same amount.

David Rendel: The hon. Gentleman makes a good point about two people, both of whom are eligible for fees. I was talking about people going to different universities but the point is even more obvious if two people, both of whom are eligible for the full grant, go
 to the same university but take different courses, one that charges the full fee and one for which there is no fee. The two students, living side by side, will realise that one of them will be £8,000 better off than the other at the end of the course, even though both families are equally impoverished. The one who is £8,000 better off may then get a better-paid job than the other. That will create a peculiar anomaly and a great unfairness between individuals who think that they should be in a similar situation.

Graham Allen: It appears that the Liberal answer to that conundrum is to force people to pay the same fee. The person who gets the education at a slightly cheaper rate will have to pay a higher fee so that everyone looks the same, feels the same and pays the same amount of money. I am sure that that is not what the hon. Gentleman intends, but may I, through him, correct—

Jimmy Hood: Order. No, the hon. Gentleman cannot do that.

David Rendel: The Liberal Democrat answer is that no one will pay any fees at all and so the anomalies will not arise. While I have the chance to do so, may I correct something that the hon. Member for Cambridge said? She said that the Liberal Democrat alternative was that everybody would pay for the cost of university education, whereas our alternative is that the extra costs that we will put into higher education will come from an extra tax only on the super rich—those who are earning more than £100,000 each. It was mentioned that the Minister would pay £100,000 worth of that extra charge. I am not sure that he agreed that it would be quite that much in his case, but I would be interested to hear his answer.

Anne Campbell: Given what was said earlier about life chances being decided well before 18—for instance, at nursery level—would not a more appropriate use for the extra money that the Liberal Democrats will raise be good quality child care and nursery education, rather than university fees?

David Rendel: I entirely agree. This is the point on which I would also support the hon. Member for Nottingham, North, who was keen that we should give people chances in life earlier on. It is important to give people chances and not to restrict their ambitions at an early stage. I entirely agree that we need more money to go into things like early-years education, which is precisely why we have said that the baby bonds that the Government are introducing should instead be used for early-years education. Why do they not do that? I look forward to support from the hon. Lady and perhaps from the hon. Gentleman for that policy. It is an important change.
 That is probably enough on the preliminaries, Mr. Hood, or you will be wondering when I will finish. I will be wondering that if I am not careful. We support amendment No. 82. Indeed, we added our names to it. Our reasons for supporting it are somewhat different from the reasons given by the hon. Member for 
 Cambridge. This is the heart of the Bill. It is about variability and whether we should have variable top-up fees in our universities. In talking about variability, the first issue that we must address, which has not been fully addressed in the House of Commons, let alone in Committee, is what is variability for. 
 There are various reasons why one might want to have variable fees. The Secretary of State said that he would expect lower fees to be charged for courses that the nation needs so that more people were encouraged to go into them. We have seen something about that in the newspapers today. It has been suggested that fees should be set at a low rate for courses like mathematics and physics because the nation needs more mathematicians, particularly to teach in our school. Everyone acknowledges that the number of maths graduates and maths teachers is sadly very low. 
 I should say that I have some interest in this in that my second son has just become a maths teacher. Perhaps I should be thinking about shortage of supply and helping him in that way. More seriously, it is important that as a country we try to increase the number of maths and physics teachers. One way of doing it would be to use variable fees to attract more people into those courses. The Secretary of State made it clear that that was his aim. He and the Labour Government have always said that they believe that one of the reasons for introducing fees at university is to ensure that those who benefit most from being awarded a degree and going into high paid jobs thereafter should be those who pay a little more towards the cost of university. I would not disagree with that. The aim of getting more people into the courses that the country needs and of ensuring that those who benefit most from higher education also pay a bit more towards its costs are both entirely laudable. The difficultly is that when young people are at university they have no idea what their earnings will be or to what extent they will receive a graduate premium from their course. However, they will be charged on the basis of the course that they do, rather than what they later earn. 
 As I think the hon. Member for Cambridge suggested, mathematicians, for example, may well earn high salaries after being awarded their mathematics degrees. There is therefore an argument that those who do mathematical courses should be charged higher fees, because they will earn more when they graduate. However, we must also remember that some mathematicians will become teachers; indeed, that is the whole point of encouraging more students to take maths courses at university, because we need more to teach in schools. Such people will certainly not be earning high salaries that will enable them to pay off large debts incurred through fees. There therefore is a great difficulty with setting the fee level on the basis of which institutions people attend and which courses they take, before one knows whether they will receive a big graduate premium for doing so. 
 Even though the two potential objectives associated with variable fees of filling the courses that the nation wants and focusing on those who will earn a graduate premium are both justifiable, neither will have any effect, because it is not the Secretary of State who will decide what the fees will be. The whole point of the provisions that we are discussing is to enable the universities to set the fee level, not the Secretary of State. The Secretary of State's objectives are not important; rather, it is the universities' objectives that are important. What do the universities want? The universities have been crying out for more money for years, and I am sure that all members of the Committee, except perhaps the Conservatives, accept that the universities have been badly underfunded and need much more money. When universities decide what fees to charge, there will inevitably be pressures on them to charge the maximum fee as often as they can, because that will bring in the most money and best meet their needs. The universities are looking to charge £3,000 everywhere, if they possibly can. 
 There are two reasons why a university might want to charge less.

Jonathan R Shaw: The hon. Gentleman said that the universities will all charge £3,000. On what basis does he make that assumption? What research has he done? Has he talked to university vice-chancellors?

David Rendel: The Government have indicated that 75 per cent. of universities will do so. Moreover, I have had the opportunity, happily, to talk many vice-chancellors. I have visited many universities over the past few years and have talked to vice-chancellors in the parliamentary universities group. To be frank, I am surprised that the estimate is as low as 75 per cent., because I have heard from vice-chancellors that nearly all expect to charge £3,000 just about throughout their universities.
 The only exceptions are for courses, perhaps in the less prestigious institutions, that are hard to fill. Where courses have already been established and there is a certain base-load cost to be met, universities may in some instances be prepared to set their fees a little lower, in order to ensure that there are at least enough students to fill the course. That is the best way to meet the base-load cost, even though one might lose at the marginal end. Some universities will feel that they will be able to charge less in hard-to-fill courses, but that will be particularly difficult for courses that are expensive to run. The other pressure on universities will be that they have to charge a higher fee for courses that are expensive to run simply to make ends meet.

Kali Mountford: Is the hon. Gentleman being rather inconsistent? If he supports flat-rate fees and he is arguing that fees would end up at that level, his argument is already won, but I do not understand his point about discounting courses. I do not understand his objection to universities filling courses. Would he rather that those courses were cut entirely?

David Rendel: I was not objecting to universities charging fees if they need to fill courses. I was saying that if we consider what universities will be doing, they will say, first, that if a course is expensive they will have to charge full fees, and if they cannot charge full fees they will simply close the course. Secondly, if they can afford to charge for other hard-to-fill courses at a lower rate because they still have enough money to make ends meet if they do so, the likely result is that young people will begin to say that those courses are perhaps less prestigious and that they do not necessarily want to take them unless they have to.
 The Minister has just revealed that those who receive a full grant will benefit from going on hard-to-fill courses, even if they are not suited to them. That may be the only way in which the universities will fill such courses, and I suspect that as a result of the Bill a number of courses, departments and universities will close in the near future.

Graham Allen: Does the hon. Gentleman accept that the level of grant given to the student will be contingent on the income of the family from which they come and that the level of repayment of any fees owing will be contingent on the income of the graduate once they are earning? There are two distinct areas here: grants and fees. The hon. Gentleman is—I am sure inadvertently—continuing to confuse them.

David Rendel: I entirely agree with the hon. Gentleman that the two areas are different, and I entirely agree also with his analysis of who pays what, when and on what it is contingent, but I do not understand that I was confusing the issue in any sense. Can he point it out to me in better words, because I did not think that I was confused?
 As I said, I think that courses, departments and potentially universities will close as a result of the Bill. If Labour MPs do not accept that, all I can say is wait and see, if the Bill goes through, because I think that I will be proved correct. Indeed many university vice-chancellors now believe that some universities, courses and departments will go to the wall because they will not remain viable if they do not charge full fees, and they will not be able to charge lower fees because in that way they will not remain viable either. 
 The second result is that there will be a great incentive for poorer students to go to cheaper universities and courses. That will be divisive for society as a whole. Students will be divided between those who have to go to a cheap course because it is the only way that they can afford university and those who are rich enough to go to a more expensive course at a more prestigious university. There will be huge tension. We will end up with exactly what we are trying to get away from. The pressures on the Russell group of universities will be enormous and more and more applicants will come from the richer part of the community and fewer and fewer from the poorer parts.

James Clappison: If the hon. Gentleman is right that some poorer students will be deterred from applying to prestigious universities, would the effect be to reduce the pool of talent from which the universities are recruiting and thereby to
 lower the standards of the universities? At the same time, will the pool also be reduced by the other side of the Government's equation, which is the social mix of the student bodies of the universities, so that universities will be reluctant to recruit from certain schools and there will be a downward pressure on standards from two sources?

David Rendel: The hon. Gentleman makes a fair point from which I would not demur. It is also true that the gap between the richer and poorer universities will tend to widen in terms of the resources coming to them. On the whole, the poorer universities will not be able to afford to charge the full fees, because they are less prestigious and will have the hard-to-fill courses. The less prestigious the university is, the less it will be able to charge full fees, the less money will come into it and the less prestigious it will become. Such universities will get into a vicious circle and there will be no way out of it, which is one of the reasons why I said that various courses, departments and universities will end up closing.
 I want to examine how variability will affect the Government's objectives in setting up the new scheme. It seems that the Government have four main objectives. The first is to get more money into the universities. The variable fees set-up will come into force quite slowly, compared with the alternative of an increase in taxation for the richest people, which we propose. Such an increase in taxation could be introduced much more quickly, and the universities could get their money much more quickly. Since the Bill was published, Universities UK has produced another set of financial requirements to cover the period up to 2010 when the Bill, if it is passed, takes full effect. The gap that Universities UK is looking to fill is still large, and the fact that the money will come in so slowly, particularly compared with the alternative solution proposed by the Liberal Democrats, will damage universities. 
 There is no guarantee that universities will be able to keep the money. The hon. Member for Cambridge spoke about the need to take as much money as possible for early-years education. If that is what the Labour party believes—a belief that I support—there is nothing to stop the Chancellor taking money from the university grant as soon as the top-up fee money starts to flow in and using it for early-years education, which the hon. Lady says is more important than giving the money to the universities. If that is what Labour really believes, no doubt that is how the Chancellor will react.

Anne Campbell: I must correct the hon. Gentleman. I said that if the Liberal Democrats' policy is to raise extra money through taxation, I question their priorities in spending it on giving everyone a free education, including those who can afford it, instead of putting the money into nursery education.

David Rendel: The hon. Lady has missed the point. Extra money will be raised through top-up fees or through extra taxation, depending on which policy
 eventually holds sway. Either way, it would be possible to use some of that money for early-years education. It is for Parliament to decide how much money should be used for early-years education and how much should be used for higher education. The decision is the same whether the money is raised through top-up fees or through income tax. The total sum already includes money from taxation going to universities. It does not matter how the money is raised; we still have to decide where it goes.
 On the Government's objective of giving universities more money, there is a difficulty about what will happen in 2010, as has already been mentioned. The whole point about variable fees is that a cap is placed on them. We know that that cap will last only until the end of the decade, when it may be removed. If it is removed, that may lead to the total privatisation of some universities, whose bosses decide that they would much rather throw off the Government's shackles and charge full fees or whatever it costs them to educate young people. They will then be entirely free of Government regulation. 
 If anyone does not believe that that is a likely scenario, or that it is not already on the minds of university bosses, I should tell them about a recent dinner that I had with the president of one of the larger and better known Oxford colleges. He told me quite plainly that when the Bill was passed and the cap ended in 2010—they do not doubt that the cap will go—they will start charging their students £15,000 or £16,000, which will be the total cost of educating students at their universities. He said that they wanted that to happen. He made no bones about it. He said that that was how they wanted to run Oxford university in the future. They did not want Government money, but wanted to charge full fees. 
 That is what will happen when the cap ends in 2010. The suggestion that that is a figment of the imagination of the Conservatives, the Liberal Democrats, or, indeed, those of us from Wales, is nonsense. That is not only a real wish, but an expectation on the part some of the most prestigious universities.

Patrick Hall: If that really is Oxford university's elitist view of the future, should not the hon. Gentleman welcome the proposal in the Bill to introduce OFFA, linked to variable fees, which will ensure that Oxford university will not be able to do what he suggested? He should be more careful before he tries to frighten prospective students.

David Rendel: The solution to the problem of whether that will be the future for elitist universities such as Oxford is to ensure that all Oxford fees are paid for out of general taxation, which is precisely what we have been proposing. If the hon. Gentleman wants to join me in making that proposal, I will welcome him into the fold.

Tim Boswell: Does the hon. Gentleman agree that if there is no cap on fees, universities will have reasserted their independence, and the provisions, which Labour
 Members welcome as providing fair access through the bureaucratic regulation of institutions, will fall away? The institutions will make their own arrangements as free decision makers.

David Rendel: I accept that to some extent, but I think the hon. Gentleman may feel that a Labour Government, if one exists in 2010, would want to continue with OFFA and a cap on fees even if that were raised above £3,000. That may be what he expects a Labour Government—if there is a Labour Government—to do, but that is not the expectation of the universities, which believe that the cap will be lifted entirely. They do not think there is any other way that the Government will be able to manage the system.

Hywel Francis: We were warned this morning not to use the language of class war. From the conversation that the hon. Gentleman recounted, I got a hint of a declaration of class war 10 years from now. What was his response to that strange comment about the cap being removed?

David Rendel: I was, as you can imagine Mr. Hood, horrified to hear that reaction from Oxford. It is appalling that Oxford should become so elitist. I had hoped that it was moving in the opposite direction.
 I return to the intervention from the hon. Member for Daventry (Mr. Boswell) because there is an important point to make about the freedom of universities. It is true that universities believe they will become much freer as soon as they can charge the fees they want and throw off Government shackles. It is important to warn universities that they may be throwing off one set of shackles only to gain another. 
 Universities will still have to be paid for by somebody and I am certain that if, for example, Oxford charges undergraduates full fees, those undergraduates will become more powerful. They will put the shackles on the university and make demands that they may not have felt capable of making before. I do not believe that universities will be freer as a result of exchanging one set of masters for another—the Government masters for the student masters.

David Chaytor: Does the hon. Gentleman accept that that is an argument in support of the introduction of variable fees? He argues that if students have to consider the initial investment that they make in the course, which they will pay back through the graduate repayment scheme, that will shift the balance in the marketplace between the producer and the consumer. That could have the positive side-effect of making the consumers—the students—more assertive and more demanding, which is wholly to be welcomed.

David Rendel: I do not necessarily believe that the assertiveness of students will prove to be of benefit to the country as a whole. The idea that the Government produce the funds for the universities will tend to mean that there is a greater chance that people will move on to courses that are really important for the country, rather than courses that may lead to the highest possible salary—courses which students may be put
 under pressure to choose. From the point of view of the country, student pressure is not necessarily better than Parliament's pressure. I would hesitate to support the hon. Gentleman.
 I come now to the second of the Government's objectives.

George Mudie: I am not sure whether you were present this morning, but my hon. Friend the Member for Bury, North (Mr. Chaytor) is a strong supporter—

Jimmy Hood: Order. I was not present this morning.

George Mudie: No. I thought I had changed what I said, Mr. Hood. I realise that I inadvertently used unparliamentary language. I am not sure whether the Liberal Democrat spokesman was present this morning, but he must be aware that my hon. Friend the Member for Bury, North is a strong supporter of a further education sector with variable fees. He pointed that out this morning. I have not noticed the customer being king in higher education. Would the hon. Member for Newbury care to comment?

David Rendel: The hon. Gentleman makes a good point. It is fair to say that students sometimes find it difficult to apply pressure. If they were to pay full fees, I believe they would begin to apply quite a lot of pressure. That is difficult in higher education at present.
 After a few attempts, I come now to the second of the Government's apparent objectives, which is to get more students to go to university. Again, the Liberal Democrats totally support that objective. It is right that this country will benefit if more students go to university. There is, as I said earlier, a huge waste of talent. We need to make sure that all those who can benefit from university—those who are intelligent enough and have the background and training to make good use of a university course—can find a place at university and use it to make the most of themselves and of their lives thereafter.

Chris Grayling: Given the fact that more young people in this country graduate from university than in virtually any other industrialised country, can the hon. Gentleman explain the justification behind his point?

David Rendel: I am not sure where the hon. Gentleman gets his statistics from, but they are not statistics that I have read. In any case, the most important point is surely not where we are now, but what will be true in the future. Virtually everybody agrees that most of the new jobs of the future will be graduate jobs and will need graduates to fill them. If we are to have a flourishing economy in the future—[Interruption.]

Jimmy Hood: Order. I apologise if I am interrupting conversations between Front Benchers. I hope not to hear any more of it.

David Rendel: Thank you for your protection, Mr. Hood. I believe that almost all the jobs of the future will be graduate jobs—about 80 per cent. are predicted
 to be graduate jobs. It is therefore important that enough young people go through university to fill those jobs in the future.

Anne Campbell: The hon. Gentleman may like to know that, according to the White Paper, the countries that have a higher rate of participation than the UK are Finland, New Zealand, Sweden, Iceland, Poland, Australia, Norway, the Netherlands and Spain—quite a number of our competitors, in fact. Have the Liberal Democrats dropped their policy of reducing the number of young people who go in to higher education? Do they still have the policy of insisting that there should be no grants for the first two years, so that young people would have to live at home in order to study, perhaps at their local further education college? I understood that that was Liberal Democrat policy.

David Rendel: As the day wears on, the hon. Lady is showing considerable ignorance of Liberal Democrat policy. When she hears a bit more about it, she may come to the conclusion that our policies were correct all along. The policies that she talked about are certainly not ours, but we will try to inform her better.
 I was talking about the Government's objective that more students should go to university, with which I agree. One reason that the scheme is not doing what Labour Members want it to is that there is, undoubtedly, a fear of debt, whatever they may say. I am not trying to raise scares, but all the research shows that there is a fear of debt, and that it will rise if the fee level is increased, because some students' debt will also increase, even though quite a large proportion of people will not have to pay full fees—about 30 per cent. would get full grants, which is great. 
 As was mentioned this morning, if it is true that some universities will charge less than the maximum fee because that is thought to attract young people to university, it must also be true that increasing the fee will tend to put people off going to university. The two concepts are part of the same idea. Claire Callender's work clearly demonstrates that there is a genuine fear of debt and that it is one of the main reasons why people are being put off going to university.

Jonathan R Shaw: Is attainment the key to accessing university education? We know that 90 per cent of youngsters who get two A-levels go on to university, whatever their social background. We can talk about debt all we like, but if attainment is the most important factor, we should put money into nursery, primary and secondary education so that youngsters can attain, irrespective of debt.

David Rendel: The hon. Gentleman is absolutely right. Throughout my remarks today, I have said that there are huge problems with attainment, the undervaluing of some of our young people, and not giving them a proper start in life. We need to do something about that. On top of that, even when they attain A-levels, there is no question but that the fear of debt puts some of them off going to university—possibly not as many
 as are put off by lack of attainment, but some people are put off even if they achieve the qualifications necessary to go to university.
 If there is any doubt about that, we need only consider the number of university applications this year. What really shows whether people are being put off going to university is not the number of people who go, which largely depends on the number of places available, but the number who apply to go. Each year, we can consider the percentage of those in the relevant year groups—the 18, 19 and 20-year-olds—who apply to go to university. There would have been 5,500 more applicants this year if the same percentage of those year groups had applied as last year. In England, we have lost 5,500 applicants somewhere. The question is: where? 
 I cannot prove to the Committee that fear of debt is the reason why 5,500 people from the relevant age groups who would have been expected to apply to university did not, but I can say that it seems likely. [Hon. Members: ''Why?''] Because that did not happen in Scotland. The number of applications in Scotland increased, despite the fact that the base number there was higher, because a higher percentage of young people in Scotland go to university. When the base rate is higher, one would expect the percentage increase to be lower because it is more difficult to carry on increasing from a higher base than from a lower base. In spite of that, the number of applications increased in Scotland and decreased in England. There must be something different between England and Scotland that is dissuading applicants in England, but not in Scotland. It has to be said that that is likely to be the fear of debt.

Graham Allen: I am sorry to be the bearer of bad news to the hon. Gentleman, but even if the Bill receives its Royal Assent this summer, the fee repayments will not start until many years hence. The reason for the reduction, as I mentioned in my opening remarks, is that people are now having to pay fees up front, and are receiving no grant. I am not surprised that fewer people are applying. The Bill addresses that problem: people will be able to receive a grant, regardless of where they come from, and repay their fees when they have graduated. Using the hon. Gentleman's own logic, that would surely lead to the increase in numbers that we should all like to see.

David Rendel: I hope that the hon. Gentleman is right, because it would be nice to think that it was just the up-front fees rather than the after-the-event fees, but I suspect that what is putting young people off now is the realisation that even under the current scheme they will have big debts when they graduate. They are already frightened of debt. If that fear is already putting off 5,500 people, how many more will be put off by the greater fear of debt at the higher fee level?

Kali Mountford: The hon. Gentleman's argument is a little flawed, given that cohort groups change all the time. If he thinks that debt aversion is the problem, can he explain why credit card debt, which has higher rates
 of APR, has risen exponentially in lower-income groups? Surely they get a better deal with student loan repayment.

David Rendel: Unfortunately, they cannot choose to swap their credit card debt for student loans and repay on that basis. They get into credit card debt because they cannot survive without it; it is not that they want it, or that they are not frightened of it.

Simon Thomas: I just want to return to the interesting point made by the hon. Member for Chatham and Aylesford (Jonathan Shaw), which should be teased out and explained. He said that the issue was about attainment, not debt aversion. We know from the studies done by Claire callender that debt was cited by three quarters of respondents from poorer backgrounds as the No. 1 reason for not going to university. I would suggest to the hon. Gentleman through the hon. Member for Newbury (Mr. Rendel) that young people should make decisions post-16. If they get to A-levels, they are already well on the way to considering a place at university. It is a post-16 decision.

Jimmy Hood: Order.

David Rendel: I agree with the hon. Gentleman's very valid point.
 I now move on to the Government's third objective, which is to widen participation by students from non-traditional backgrounds in particular, not just student numbers in total. That is also an excellent objective that the Liberal Democrats share. As the hon. Gentleman said, the fear of debt is a particular problem for that group, which will be directly affected by variable fees even more than will other groups.

Hywel Francis: Professor callender advised the National Assembly for Wales Rees committee on the question of debt aversion, as a consequence of which the Assembly learning grant was introduced. Welsh Ministers acknowledge that that decision has influenced our decision at Westminster. The question of variable fees is now directly addressed by the reintroduction of the maintenance grant, so when the hon. Gentleman talks about Claire callender's work, he is talking about the present, not the future.

David Rendel: I am not quite sure that I understood that, but I should have thought that the response would be the one that I have already given, which is that the new variable fees will put a lot of pressure on young people to go to less prestigious universities. I am not certain that that answers the hon. Gentleman's point, but I hope that I understood him correctly.
 There is a second point about the fear of debt among people from less well-off backgrounds, and it is in fact a compliment to the Government: unemployment is comparatively low, and I give them all due credit for that. It is certainly a great deal lower than it was under the previous regime, which must be good news for everyone. In my area, it is particularly low, at less than 1 per cent., and that, in effect, is simply people moving between jobs. With the cost of going to university going up, therefore, there is a much greater incentive 
 in such areas for young people from less well-to-do backgrounds to go straight into work at 18. In my area, young people can get good, well-paid jobs at 18 or, indeed, 16, even if they do not have particularly good qualifications. They will be particularly willing to do so if they believe that they will face a large debt as a result of going through university. The premium that they are likely to gain by going to university will seem comparatively low, because they know that they can earn a good salary even without going to university.

Jonathan R Shaw: The hon. Gentleman may have read the ''Student Living Report 2003''. In it, youngsters talk about the optimism that a university degree gives them, but perhaps he has done a more in-depth study.

David Rendel: There are undoubtedly people who feel optimistic about what going to university will do for them. If they have chosen to go to university, however, they will probably already feel optimistic about the results. The people who I am worried about are those who do not go to university because they are not sure whether they will get a good salary as a result. I thought that Labour Members were also worried about people who have good enough results to go to university but who nevertheless decide not to go. Those are the people who I am trying to help.
 I turn now to my next point about widening participation among those from poorer backgrounds. It was said earlier that debt will be perfectly repayable, and that young people would repay it only when they could afford to. One of the points made about the Liberal Democrat policy of introducing a higher income tax rate is that it would be unaffordable, so it is worth reminding Labour Members that the marginal repayment rate for people who start repaying loans under the new scheme will be 42 per cent. for those with an income of £15,000. That will include the 22 per cent. standard rate of income tax, 11 per cent. national insurance and 9 per cent. graduate loan repayment. That 42 per cent. is a higher rate than is currently paid by those who earn, say, £80,000.

Anne Campbell: I am sorry, but I have heard this argument from the Liberal Democrats before, and of course the rate is not 42 per cent. The 9 per cent. rate will be on incomes of £15,000 or above. One normally pays income tax on everything above one's personal allowance, which is about £4,000 or £5,000. The two things are completely different, and it is quite bogus to say that the proposals equate to a 42 per cent. income tax. That is nonsense.

David Rendel: I made it explicit that I was talking about the marginal rates on amounts above £15,000, and although I do not deny for a moment that the hon. Lady has got her figures right, they are exactly in line with what I said. I made it clear that people will pay 42 per cent. of their salary above £15,000 in income tax, national insurance or graduate repayment loans.

James Plaskitt: Let me clarify the point, because the hon. Gentleman seems to be in a muddle. Let us take someone who is earning £15,000 and who has just gone over the threshold for repaying their student loans.
 They are currently paying 21 per cent. of their gross income in tax and national insurance. Once they start repaying fees, having gone over the threshold, the combined repayment represents 22 per cent. of their gross income. That is the reality of the change; not the 42 per cent. that the hon. Gentleman was talking about.

David Rendel: Of course the overall picture is different when we take allowances into account, but nevertheless I have made the point plain that the marginal rate of tax is paid by those earning more than £15,000 up to when they pay the higher rate of income tax. At that point it becomes 51 per cent., even higher than the Liberal Democrats would be charging those earning £100,000. But in the middle, where one pays the standard rate of income tax, one would be paying a marginal rate of 42 per cent.

Graham Allen: Will the hon. Gentleman give way?

David Rendel: May I finish my answer on this point? The marginal rate may be 42 per cent., but if one is paying that rate only on £1,000 because one's income is £16,000, one is almost certainly not even repaying the interest on the loan. If one's salary is that low, the amount of repayment probably does not even cover the amount that the loan has increased that year in line with inflation, so the cash balance on the loan is increasing year by year if one's salary is that low. Admittedly, after 25 years it is wiped out, which is good news. That is one of the advantages in the changes that the Government have made. I fully accept that if we have to have this scheme it is much better that there should be a write-off moment, but nevertheless it is true to say that in the first instance, those who are paying low rates because their salary is only just above £15,000 probably are not even paying off the increase in the loan each year.

Graham Allen: To cut through much of the mathematics and the hon. Gentleman's statistical finesse, may I ask whether he accepts that someone from a non-traditional family would have to repay about £4 on their fees when earning £18,000, and £25 or so when they are earning £30,000? Whatever statistical finesse about marginal rates and so on that the hon. Gentleman can come up with—which frightens youngsters who are concerned about these issues—when we talk in terms of real money, we see that the loan repayments are probably the best under any system, public or private, in the UK.

David Rendel: I hope that I have been talking about real money, because at the marginal level it will be 42 per cent. of real money. There is no getting away from that. That is what the Government are threatening to charge young people; in fact, it is what they are charging at present those repaying Government loans. It is a frightening amount, and we can see that from the statistics: even the current repayments are frightening people.

James Clappison: I will have to look carefully at the hon. Gentleman's arguments later, because given my background they bamboozle me. I am sure that they are worthy. May I put forward a straightforward argument on the basis of the hon. Member for Nottingham, North saying that it is a good deal? Has the hon. Gentleman looked at the capital amount that students will receive by way of grant now and how much they will have to repay in the future? Is it the case that someone with a family income of £20,000 will receive a combined grant of £1,770 under the system now but will have to repay the capital sum of £3,000 later when they have graduated?

David Rendel: I am not clear whether the hon. Gentleman is talking about the current scheme or the new scheme.

James Clappison: The new scheme.

David Rendel: The new scheme has not yet been introduced. I have not checked the hon. Gentleman's figures, obviously, because he has thrown them at me at short notice, but I am prepared to accept them; I am sure that he has done his mathematics correctly.
 I hope that it is fair to say that we have had a good discussion, because I suspect that half the time that I have taken up has been made up of interventions. I turn to the fourth of the Government's objectives, which is to make sure that they charge most to those who gain most from university. At least, that should be the Government's objective; it is certainly my preferred objective. The Government's objective actually appears to be to charge everyone equally regardless of whether they gain from university education. All graduates will be charged simply according to the course that they take and regardless of the career path that they follow afterwards. 
 That comes back to the point that I made earlier: if one takes a maths course, the question whether one goes into a highly paid job or into something like teaching, which is low paid, is important. That makes a huge difference, and the Government scheme takes no account of the actual premium that can be gained from the course rather than the theoretical premium that, in the end, many will not receive. That is where the system falls down, and that is why it will be unfair. 
 The scheme will be unfair also because only new graduates will be charged. Many of us who went to university some time ago were lucky enough to have our fees paid and may also have received grants. We will not be charged a thing under the Government's scheme, even though some of us will have gained considerable financial benefit from our degrees.

Alan Johnson: I want to ascertain that we are debating, among other things, the difference between fixed and variable fees. I thought that the hon. Gentleman's contribution was not his Second Reading speech but one about that precise point and about supporting the amendments tabled by my hon. Friend the Member for Cambridge. Is he saying that there is some difference between a fixed fee of £3,000, £2,500 or even £2,000 and a variable fee, or is he just making a general point against fees per se?

David Rendel: Clearly, the introduction of variable fees will result in repayments under the new scheme being generally higher than those under the current scheme. We are talking about whether the variable fees will damage even more unfairly those who have to repay them. The answer is yes, because some of them will have to pay much higher fees than they would have had to pay under the current scheme. The clause will make that more unfair, because only under the new scheme will graduates have to pay large fees and repay large loans—unlike me. I understand that the Minister did not go to university, so that does not apply to him, but it clearly applies to many hon. Members. We got away with not having to pay tuition fees; it is unfair that we should not be charged anything, despite the fact that we may have gained financially.

Patrick Hall: I know that it is tempting to make comparisons with the 1950s, '60s and '70s, but they are not credible in the context of access to university today. In those days, only 6 or 7 per cent. of school leavers went to university. That is entirely different from the current situation; 43 per cent. now go to university, and the funding problem must be addressed.

David Rendel: It is a different situation, but it is different in a way that backs my argument. Those who went through university then tended to have an even higher graduate premium than many of those who are now at university, so in a sense, it is we, rather than new graduates, who ought to be charged extra because of the huge premium that we have attained. The scheme is even more unfair for the reason given by the hon. Gentleman.
 We are looking for something that is fair and progressive, and in the past the Labour party has been keen to introduce such a system. Labour Members even supported the Bill on the grounds that it would be fairer and more progressive than the current system, and I would not necessarily disagree, but it is certainly not as fair and progressive as the solution proposed by the Liberal Democrats. It is not as fair because everyone pays rather than just those who gain the greatest financial benefit; and it is not as fair because only new graduates will pay rather than all graduates who have gained a financial benefit from their university education. 
 The Government's scheme is not as fair and progressive as the Liberal Democrat scheme. I would like to see the Government move to our proposals, which seem fairer and more progressive. I emphasise that it is wrong to say that Labour Members have to go with the present scheme because it is the only one on offer. There is no question that a fair and progressive alternative is on offer, and I hope that the Committee will adopt it.

James Clappison: I welcome the chance to make a brief contribution to the debate. As Members will have gathered, I have a particular interest in veterinary medicine, and I wish to speak to amendment No. 110, which specifically covers students of veterinary medicine and excludes them from having to pay fees
 beyond the first three years of their course. I have received representations on the subject from veterinary students in my constituency.
 Though it is just outside my constituency, in North Mymms, a large number of the students at the Royal Veterinary college, part of London university, live in Potters Bar, in my constituency, and make a lively contribution to the community. They have told me of their concerns about the imposition of fees, of the effect that they think it will have on the demand for veterinary courses and of the effects that it will have on the type of veterinary medicine that students wish to practise when they graduate and become vets. I quote briefly from what they have told me: 
 ''The prospect of having to contribute more to the cost of education is bound to influence the choices of those applying to university, and veterinary medicine will not be unaffected. The course is two years longer than most other courses, resulting in both a higher debt upon graduation and a two-year delay before students can enter the workplace.'' 
They go on to point out that, unlike many other students, veterinary students have to do a large amount of extra-curricular work and have longer terms. [Interruption.]

Jimmy Hood: Order. I have to remind right hon. and hon. Members that, when I can hear whispering, they are whispering too loudly.
Mr. Boswell rose—

James Clappison: I give way to my hon. Friend.

Tim Boswell: I rise to spare the Committee my having to make a speech on this matter. I declare my interest as an honorary associate of the British Veterinary Association and someone who has visited the London veterinary college as a Minister.
 One of the particular problems for veterinary students is that whereas medical students, who also face very long terms before qualification, may, in the public interest, receive some support through the NHS, veterinary students typically, though not always, go into the private sector and receive no such support, although their services are extremely important to public welfare, as, for example, the recent disastrous outbreak of foot and mouth disease has shown. Does my hon. Friend agree?

James Clappison: My hon. Friend's point is absolutely correct and I would ask the Minister to address it. Given his interest, my hon. Friend will be as concerned as I am that veterinary students tell me that there was a 7 per cent. drop in applications for veterinary medicine last year. On top of that, they are particularly concerned that it is already a struggle to attract new vets into farm animal practice and research, and if the choice of a new job becomes purely a financial concern, that could have a serious effect.
 There are also student fears about the social mix of veterinary students. It is very hard for those from non-traditional backgrounds to go into veterinary medicine. There is a tradition of farming or countryside people going into it, but many children from cities and from non-agricultural and non-country backgrounds find it hard to become a vet, 
 despite their aspirations. They feel that tuition fees are a very hard deal. I would invite the Minister, when he responds to the debate, to give particular concern to the subject of vets and, hopefully, to say something constructive to me about the position of veterinary students in future.

David Chaytor: Will the hon. Gentleman accept that the 7 per cent. reduction in applications last year needs to be seen in the context of the pattern of applications for veterinary science degrees over a number of years? His case would be stronger if he could demonstrate a year-on-year reduction in applications. Does he have the figures to prove that case?

James Clappison: I am going on the basis of points made to me by the veterinary students themselves, and the hon. Gentleman may have the advantage over me on that issue. I remember that when tuition fees were first introduced veterinary students were worried about the effect, because then as now their course was longer. I have been told often since that this particularly affects the social mix of people coming into veterinary science. The Royal Veterinary college could lose both ways. Not only will it have fewer able children from non-traditional backgrounds as a result of the greater debt, but it will also be penalised under OFFA for having the wrong type of social mix within the student body. I am sure that the college would want to see all young people who aspire to become vets, and who are good enough and have the qualifications, achieve that aspiration, whatever their background.
 Veterinary students will be eligible for the same support as other students. I am sure that the Committee has already heard quite a few analyses of the financial support arrangements, so I shall just seek some clarification on the matter from the Minister. We have already heard a great many arguments this afternoon. 
 I respect the concerns that the hon. Member for Nottingham, North has for his constituents and I appreciate what he is trying to achieve. I share the hon. Gentleman's concern about getting more children from lower income families into higher education, but, without wanting to go too wide, I have a problem with his argument. As we have heard, the number of young people going to university has substantially increased over the past 30 or 40 years, whichever Government have been in power. However, the problems that the hon. Gentleman described have persisted. He must consider the anti-education culture, which is how he rightly described the problem. I accept the concern that he expresses. 
 The support that is being made available is important. The hon. Member for Nottingham, North is correct that, as we have heard repeatedly, the support that is now being made available is available up front. The liability for fees will arise later on, when students graduate. That is entirely fair and one must consider the package in that context.

George Mudie: On further reflection, would the hon. Gentleman agree that the situation has not changed? The poorest person in the community who goes to university does not pay up-front fees.

James Clappison: The hon. Gentleman has beaten me to it with that point, on which I should like to expand in a moment, as it contains some important issues relating to an amendment that the Committee has not yet considered.
 The hon. Member for Nottingham, North implied that there is no connection between the package that is being made available to students now and later liability. I did not have the opportunity of attending the seminars to which he referred, but I listened to the Secretary of State make his announcement to the House of Commons on 8 January. In view of the intervention that the Minister made on me earlier, I remind the Committee that the Secretary of State himself specifically linked the package of £3,000 to the liability for fees. He said: 
 ''My fifth and final intention is to ensure that every student from a poor economic background has enough resources to meet even the highest course fee without incurring additional debt. The £3,000 package is achieved by maintaining fee remission at about £1,200; raising the new higher education grant from the £1,000 that I originally proposed to £1,500 a year for new students''.—[Official Report, 8 January 2004; Vol. 416, c. 419.] 
He went on to talk about a bursary of £300, which makes a symmetry between the £3,000 in the package and the £3,000 higher limit on variable fees. There is a link there, which has been made explicit.

Alan Johnson: I accept the hon. Gentleman's point. Things have moved on and fee remissions have been turned into a grant, to be paid up front. I do not criticise the hon. Gentleman; things moved quickly over that four-week period. In case I did not say so in the course of a lengthy reply, I should like to tell the hon. Gentleman about the numbers of students applying for veterinary courses. The figure for people applying for pre-clinical veterinary medicine is up by 9.3 per cent., the figure for clinical veterinary medicine and dentistry is up by 70.6 per cent., while the figure in relation to veterinary science, agriculture and related subjects is up by 9.1 per cent. I see no justification whatever for claiming that there has been a 7 per cent. drop.

James Clappison: I was putting forward the representation that had been made to me. Given the interest that the Minister now has, I hope that he will be alive to concerns about the matter in future, particularly about the social mix of veterinary students, which I hope I stressed.

David Chaytor: Will the hon. Gentleman give way?

James Clappison: I should like to deal with the first point in the Minister's intervention. He was trying to say that when the Secretary of State made his remarks on 8 January, they were not on the basis that £1,700 was an up-front grant. I understood that at all material times, as far as the Government were concerned, the £1,700 was an up-front grant and not fee remission, and it was proposed explicitly on that basis. The
 Secretary of State linked the £1,700 grant—he referred to it as a grant—to the matter of the £3,000. The words are in Hansard and I invite the hon. Gentleman to read them. The Secretary of State himself linked the amounts as a package to help students meet their fees.

David Chaytor: My hon. Friend dealt reflectively with the pattern of applications, but I suspect that he will shift his ground now and talk about the social mix. The HEFC figures for the Royal Veterinary College show that the balance between state and private school applicants is quite good compared with that of some of the leading research universities. If we use the HEFC benchmark as a broad guide to the social mix of an institution, 61 per cent. of students should come from state schools. The Royal Veterinary College is already achieving 56 per cent. A gap of 5 percentage points is not too bad when considered within the wider context of the leading universities. Can the hon. Gentleman give the Committee some other evidence about why the social mix should be the serious point?

James Clappison: It is interesting that the hon. Gentleman considers social mix purely in terms of independent schools and state schools. [Interruption.] We heard his concerns about Eton and Harrow this morning. I remind him that many children from traditional backgrounds in country areas who go into veterinary medicine have been to state schools. I am reflecting their concerns. I am happy to put to the Committee the points made by students who attend the Royal Veterinary College. The hon. Gentleman might want to emulate the example of my hon. Friend the Member for Daventry, and go to the college to discuss the matter with those students.
 I draw the Minister's attention to a matter that has not yet been raised in relation to the package that is available in compensation for the higher levels of fee. The thresholds at which that help becomes available are set much lower than the threshold in place at present for remission from existing fees. The hon. Member for Nottingham, North said, forcefully, that he wanted to put the grant into the hands of students, and that the most important thing was that they should have the money now. His implicit assumption was that the grant going straight to students would be the same as their later liability, but beyond the threshold of £15,970 what students receive will be less than what they will have to pay later. Between £15,970 and £22,270, the higher education grant is phased out—it is on a taper. 
 When I referred to the current system I was referring to the Government's figures in the consultation paper. Under their proposals, students with a family income of £20,000, which is fairly modest, will receive a combined grant of £1,770—that is what will go into their hands. However, they will later be liable for fees of £3,000; they will receive a capital sum of £1,770 now but they will have to pay £3,000 later. That is not a very good deal, and students do not have any choice in the matter because they will be charged £3,000 whether they like it or not. The question is how they manage to pay it. The proposal has been presented as a good deal but I do not think that students would be queuing to 
 take advantage of it if they were given the option of choosing that or the current system. At present, if their family income is less than £20,970 they do not pay anything, because their up-front fees are covered in full by fee remission. So for the first time students will be paying on a sliding scale for the cost of their tuition—for five years, in the case of the veterinary students. To be fair, they will do so later on after they have graduated. There are many people in that range of modest family incomes—I would unequivocally call them poorer families—and this is the first time that students on such incomes have had to pay for their tuition fees. 
 For those above the new threshold of £22,270 the position is even more stark and the deal gets even worse, because between £22,270 and £33,533 there is no higher education grant at all. We can forget about the package that was announced by the Secretary of State. They will still receive some assistance with fees, which will be remitted on a sliding scale as they are under the present system, but, as with the students in the lower category, they will be liable for the full fee of £3,000 later on. 
 To take just one other example, and I ask the Minister to correct me if this is wrong, someone who has a family income of £25,000 will receive a total grant of £900 now, but they will be liable to pay £3,000 later on—not, I think, a good deal. The Minister has to face the fact that what he has repeatedly represented as a good deal for students is no such thing; students would not be queuing to take it up if they had the choice. With all respect to the hon. Gentlemen opposite who are concerned about lower income families, they should have looked more closely at the thresholds at which help is available before rushing to claim that the scheme is generous. I would not call it generous at all. 
 The level beyond which all help is cut off and the £3,000 must be paid is £33,000, which in itself would be a modest income for a family. I am not sure whether household incomes were being quoted or the family incomes of children of university age who are likely to attend university. The hon. Member for Cambridge was right about families in the south-east—there will not be that many people in my constituency who have a combined income of £33,000, and still fewer of under £22,000. In all those cases they will be liable to pay much higher fees than at present, so I do not see this as being a good deal. 
 That situation is bound to affect the choices made by children in those income brackets that will be paying for the first time. It is a poor deal for students and for families. If I am wrong about any of the figures or thresholds that I have quoted, I look to the Minister to put me right. 
 People in the £15,950 to £20,000 bracket will be paying for the cost of their education for the first time, whereas at the moment they receive it free because all their fees are paid for. They will be paying in future, but they will be paying for the cost of their education in the first place.

George Mudie: The hon. Gentleman has touched on a serious point, because social inclusion is a very important matter. It is the saving grace of the Bill.
 I wonder whether the hon. Gentleman has not been too generous with the Government. I have a document that states that all partial grants run from the £15,200 to £21,185 band, which would suggest that over £22,000 no one gets any grant. There is now some suggestion that that was running to £30,000. I am not sure whether the £30,000 has been pulled back in the same way as the figures at the lower end of the scale.

James Clappison: Beyond £22,270, the new higher education grant will not be available to anyone. To be fair to the Government, students over that threshold will still receive the fee remission, but they get that help now. I will give way to the Minister if he wants to correct me.

Alan Johnson: The hon. Gentleman helpfully asked me to intervene; if I do not, it will seem that his figures are right, but they are wrong. Full fee remission runs from some £21,000 to about £30,000—I do not have the exact figures. Fee remission will be £1,200 in 2006, and students will pay more if their fees are higher. There is no avoiding that: they will pay it later on an income-contingent basis. We have decided, having debated the issue at length over the past few weeks, to turn the fee remission into an up-front grant. Nobody will get fee remission any more, but the taper for the grant—that is where the hon. Gentleman is wrong—runs beyond £30,000. By 2006, when the legislation takes effect, it will be up to about £33,000 a year. The up-front grant will depend on household income, so nobody will get fee remission. There is a perfectly logical argument for that, which I cannot deal with in a short intervention.

James Clappison: Things are moving quickly, but my figures are based on the written reply that the Minister gave me on 5 February. The description that I gave of family income of £25,000 was based on the paper of the Department for Education and Skills entitled ''Moving toward a single combined grant for higher education''. When I referred to the current system, on which I was corrected earlier, I was referring to what is described in that paper as the current system, which is in fact the Government's proposals. The Government are moving on to something even newer in the form of a single combined grant. To be fair to the Government, there is a £1,000 variance here or there on the threshold, but setting that aside, the point is that the fees are up front now, but students will pay more later on. For families with an income of between £22,000 and £30,000, as things stand, they pay the fee of £1,125, but they receive remission of that fee. In future, they will receive a grant towards that, which will be the same as the fee remission. However, the liability will be much greater because there is £3,000 of liability. I would regard that as a bad deal, and I do not think that students will be queuing up to receive it.
 I do not think that the Minister can gainsay my analysis: he may argue about it, but he cannot gainsay the fact that between £15,970 and £20,000, students will be paying something towards the cost of their education for the first time. That is significant, and 
 there is some agreement on that. If my figures are wrong, I should say that I have tried to be as fair as possible. I have based my figures on the answers and the documents that the Government have put into the public domain. It is not a good deal, because the amount that students will have to pay on graduation will be far more than the help that they are receiving now. That will have an effect on them, so it is a bad deal.

Patrick Hall: It is clear that clause 23 and the proposed amendments to it deal not only with the central core of the Bill, but with matters of central importance to the future of higher education in this country—and therefore also with the future of the country. The key issue is access to quality higher education. At the very least, we should achieve the modest target of 50 per cent. of 18 to 30-year-olds in higher education by 2010. Why do we need to expand access to higher education?

Jonathan R Shaw: My hon. Friend referred to the target. Does he agree with me, as the Higher Education Policy Unit said, that demographic changes will mean that we shall have nearly 50 per cent. of students—between 180,000 and 250,000 additional students—with two A-levels going on to university?

Patrick Hall: Yes, indeed. I was coming to that, but my hon. Friend has saved me the trouble. That is the target that has been mentioned. It is clear that demand for graduates continues to grow. The Association of Graduate Recruiters recently carried out a survey of employers, the results of which showed that the number of graduate vacancies is predicted to increase by 12 per cent. in 2004. The demand for graduates is increasing. The Institute for Employment Research shows that by 2010, the number of jobs in this country that require skills associated with an HE qualification will grow by 1.7 million, which is most of the new jobs that it is predicted will be created. As has been said, demand is growing for several reasons, including demographic change, better school performance and the widening participation of both genders. For those reasons, the Institute for Higher Education Policy estimates that there will be between 180,000 and 250,000 more students in the remainder of this decade. The universities want to meet those demands, and we should all want the HE sector to do so. It is good for society, for the economy, and for the individuals whom will benefit directly from that out-turn. If we are to do all that, we must fund it, which is what we are discussing.
 Despite the impressions given by some in this Committee, in the House of Commons and beyond when discussing the Bill, the taxpayer already supplies the bulk of money given to universities in this country through HEFC, through the research councils, and through the Teacher Training Agency. Graduates make a contribution through the existing tuition fee system. Industry also contributes. I know that my hon. Friend the Minister and the Government are considering introducing endowments, which, unlike 
 other countries, this country has not had much of. These are all important matters. Some schemes already exist, some will be introduced and others will be enhanced. Fees contribute greatly to what universities require.

Tim Boswell: The hon. Gentleman is giving a perfectly fair list. However, does he agree that it would be appropriate to add to it the income that students have forgone during their undergraduate years? The opportunity cost of their learning is a substantial commitment, which is often overlooked.

Patrick Hall: Indeed. I welcome the hon. Gentleman's point. I will talk about that later. Students forgo wages when they are studying, but they more than make up for it afterwards, as the figures clearly show.
 The 2004 spending review submitted by Universities UK shows the amount of money that universities need. My hon. Friend the Member for Cambridge quoted the estimate that only 12 per cent. of the revenue requirement will be met by the proposals of introducing variable fees, but page 6 of the Universities UK review shows that tuition fees would contribute to an estimated 54 per cent. of universities' needs. One must make an allowance for Northern Ireland, but that is still a significant contribution. Tuition fees were never intended to meet all the requirements, and it is false to pretend that they should. There are several sources, and the largest source will continue to be the general taxpayer. 
 What are we going to do if we do not make a large contribution through tuition fees? We heard that the Liberal Democrats would raise money through general taxation. I heard the hon. Member for Harrogate and Knaresborough speaking on Radio 4. He managed to get on at peak time one morning while I was having my breakfast. I remember him saying that the Liberal Democrats would not raise the money through general taxation, but of course they would. The rate of 50 per cent. for people earning more than £100,000 a year is part of the income tax system. That is a perfectly reasonable way of raising money. There is nothing wrong with it. However, unless the Liberal Democrats can guarantee that they would earmark that higher tax band exclusively for higher education, there is no guarantee that the money would be directed forever more to that source only. It would go into the general pot and could be used for all sorts of things. Our point is that if additional money is to be raised from the taxpayer, over and above the increasing commitment already being made through the spending review undertaken by the Government, that money could be directed to better places in the education sector. That has been widely acknowledged. In particular, it could be redirected to the early years and primary school sectors.

Mark Francois: I am following the hon. Gentleman's argument closely, particularly the points that he has made about the importance of guarantees. Can he tell the Committee what guarantee he, or any other member of the Committee, has that none of the money raised from tuition fees will then be clawed back by the Treasury?

Patrick Hall: The money would go direct to the universities through the graduate contribution scheme that is an integral part of the Bill.

Mark Francois: The hon. Gentleman has not answered the question that I asked. The universities receive money from the Treasury in block grant anyway. If they are going to get additional money in fees, what guarantee does he have that the Treasury will not then claw back some of the money in block grant? That was my question.

Patrick Hall: I understand the hon. Gentleman. The honest answer is that there is no absolute guarantee that that would not take place, especially if there is a change of Government. However, we need to test that question, which is perfectly fair, against the record. The record under this Government is that contributions to the universities' general pot are increasing steadily yearly, at least in real terms.

Alan Johnson: My hon. Friend is making an eloquent case. His point is that the solution suggested by the Liberal Democrats, which is that Her Majesty's Treasury should have the money, contains no guarantee that that money will go to the universities. We do not yet know the policy of the Opposition. The important point made by my hon. Friend is that the money that goes from fees goes direct to the universities, and that they have total control over that money. The issue of how money might be clawed back from other areas is a different issue—[Interruption.] It is not an unrelated issue, but a different one. On that point, my hon. Friend's answer to an intervention was absolutely right. The money from fees will go direct to the universities, and will not go to the Treasury from where it may get to the universities.
Mr. Mudie rose—
Mr. Willis rose—

Jimmy Hood: Order. The hon. Member for Bedford can give way to an intervention only if he is on his feet and speaking.

Patrick Hall: Thank you, Mr. Hood. Having said a few words, I am happy to give way to encourage the flow of the debate. However, with your guidance, Mr. Hood, I suspect that you will not allow me to take both interventions at the same time, so I will start with my hon. Friend.

George Mudie: I share the Minister's view that my hon. Friend is making an eloquent speech. The point as I see it was that my hon. Friend feels, on behalf of the Government, that more students should pay a larger part of tuition fees. Lord Dearing agreed a percentage in his report. Can my hon. Friend reassure the students-to-be of 2006 with some indication of what percentage the Government will settle on as they move from that of Dearing?

Patrick Hall: I do not know precisely what the percentage will be at that point. I am sure that my right hon. Friend the Minister will give us some figures when he sums up the debate. It is a moving feast, as the
 amount of public money going to the universities is increasing generously in real terms. However, it is still not enough and we are now proposing getting more money in from graduates. We need to look at other areas as well.

Phil Willis: I agree that the Government's proposals guarantee income when the Treasury is involved. Since 1998, fee income replaced grant income until the past two years. However, would the hon. Gentleman also agree that the money that goes into teaching in our universities since 1998 has declined on an annual basis? That is the core of the problem that we are trying to address. Neither the Government's nor ours can guarantee those resources going to universities ad infinitum; but both parties are taking an honourable position.

Patrick Hall: I accept that much more money is needed for teaching—for equipment, for maintenance of the estate and so on, but teaching itself is most important. We want quality, unlike what happened in the early 1980s, when access was expanded on the cheap by a Conservative Government. We do not want to go that way, but we have to balance trying to achieve the best, in a way that works and that is also fair.

Simon Thomas: I would like the hon. Gentleman to explain something that he said earlier, which rather unpins his argument. We accept that the fees will go direct to universities, but I thought he said earlier that, according to page 6 of the Universities UK document, fees would provide about 46 per cent. of the money identified by the report. However, the report seems to identify only recurrent costs of more than £5 billion a year. We know that fees will raise at the most between £1.2 billion and £1.3 billion. How is it that his figure represents almost half the money needed by universities?

Patrick Hall: The figure that I quoted was 54 per cent. The hon. Gentleman was right in what he said, but tuition fees are not intended to meet all the costs in that list. Once those elements are deducted, the remaining figure is 54 per cent. I acknowledge that it is not enough, but it is nevertheless a significant contribution.
 I have made a few comments on how the Liberal Democrats would deal with this important job, which the Government feel should be addressed as suggested in the Bill. I shall now consider how the Conservatives would address the matter.

David Rendel: Will the hon. Gentleman give way?

Patrick Hall: It will prevent me from getting on to something rather interesting.

David Rendel: It is interesting, but as the hon. Gentleman had mentioned our alternative policy I thought I would tell him that, according to The Guardian ICM poll this morning, when Labour party members were asked how the Government should raise money for public service improvements, 5 per
 cent. said that they should be met out of an increase in user charges. However, 66 per cent. of Labour party members said—

Jimmy Hood: Order. I am beginning to think that the Committee is becoming repetitive, and the hon. Gentleman's comments are not relevant to the amendments.

Patrick Hall: There are all sorts of ways of raising money. Broadly speaking, as long as it is fair, which this package is, that is the way forward.
 I shall make a few brief comments on the Conservative party's position. Although Conservative Members constantly claim that they have no policy, there are indications of what the policy might be from remarks made and from attitudes struck—and from the amendments. We also know what the policy was a few months ago. Not only would it not raise the extra money required—variable fees would at least make a contribution—but it would cut the existing fee income. That is astounding. They would cut the £800 million a year that is currently raised by tuition fees. They would also fail to support the universities' expansion plans to deal with the change in demographics, the increased access agenda and so on. Although all sorts of figures have been bandied about—it is perhaps a moving feast—the figures that I saw that were credible at the time worked out at an average of 600 fewer people every year from every English constituency having access to university. That would be a disaster, not only for individuals but for the country. That comes from a party that, when in office, cut funding per student by 36 per cent. over a period of years.

Eleanor Laing: Has the hon. Gentleman forgotten that during the years of Conservative government—one assumes that that is when most of us attended university—the number of 18-year-olds going to university increased from one in eight to one in three. There was a massive expansion in student numbers.

Patrick Hall: I do not know whether I should be grateful for the hon. Lady's implied compliment. It was certainly very kind of her to suggest that I was at university when the Conservatives were elected in 1979. I acknowledge that there was a considerable expansion in student numbers, largely as a result of the conversion of polytechnics into universities in the early 1990s. Entrance figures also increased year on year. However, that was done on the cheap, and there was a 36 per cent. cut in spending per student. That is why we are now in difficulties and why certain areas of our economy are underperforming. We failed to invest year on year in important subjects such as mathematics and engineering. When the Conservatives left office, we had an impoverished higher education sector and, in effect, a cap on quality. We cannot continue with that. Indeed, that is why the Conservatives commissioned Dearing.

Tim Boswell: I intervene only briefly to disabuse the hon. Gentleman of the idea that the policy derived exclusively from the Conservative Government. He said that they created the rapid expansion and, in effect, capped quality, but if he looked at the record, he would realise that, in those days at least, the Government did not seek to run the university sector. In fact, much of the expansion in numbers was inflicted by the universities and fell outwith the Department's projections. We rightly wanted to expand, but the expansion went faster than anyone had planned.

Patrick Hall: I thank the hon. Gentleman for his explanation, but I notice that he did not try to disabuse me of my ideas about the real-terms cuts per student, which were also a legacy of that time. I agree that expansion took place for several reasons, but it sometimes happened on the cheap.
 I have one other point, which has not often been made, about the Conservative proposals to fund universities. The Institute for Fiscal Studies report '''Study now, pay later' or 'HE for free'?'' was published in June 2003. It contained a very important conclusion about the Conservatives' general position on funding university education in a contracting higher education sector—and the sector will contract if the huge cuts that they propose come about. Perhaps I should just mention that this is a party that is also promising to cut general taxation, but one obviously cannot get something for nothing. That aside, the important conclusion in the IFS report is that the Conservative proposals would bring about a redistribution of resources from the poorest households, which generally do not participate in university education, to richer households, which generally do. That is absolutely outrageous.

Tim Collins: The hon. Gentleman has waxed lyrical about the drop in funding per student that, as he rightly said, took place during the 18 years of Conservative government. Since then, we have had seven years of Labour government. Page 9 of the document to which he referred shows that funding per student, excluding student fees, has gone down since 1997. Indeed, even including student fees, it has gone down since 1997. On that basis, I take it that he also condemns his own Government's record.

Patrick Hall: I believe that funding has not recovered anything like enough; that is absolutely right.

Tim Collins: It has gone down.

Patrick Hall: I do not know that it has gone down. I will wait for those who have access—[Interruption.] I do not know that it has gone down, but it certainly has not recovered to the extent that it should and it has not met the increasing needs. We are discussing the Bill to try to address some of those matters.

Alan Johnson: Can my hon. Friend recall that the Dearing committee, commissioned by the Conservative party when it was in government, was presented by that Government, which had run down university funding by 36 per cent., with a proposal for a further reduction of 6.5 per cent. in real terms?
 Dearing recommended to the incoming Labour Government that the funding should be reduced by 1 per cent. rather than 6.5 per cent. and because, in the first two years of our Government, we were stuck with Conservative spending plans, that is what we did. However, that was related to the situation that the Conservative Government left us.

Patrick Hall: I thank my right hon. Friend for putting that on the record at exactly the right time in the debate.
 On the balance of funding between individual graduates and the general taxpayer, the general taxpayer provides the bulk of the money for the universities, contributing more than 60 per cent. of higher education funding. As a result of the Government's policies, the amount that has been contributed by the general taxpayer, although not enough, has increased significantly in recent years.

Tim Collins: The hon. Gentleman is right to say that the total amount of money each year has been going up since 1997, but that has been the case since 1979. The fact is, however, that in every one of the seven years of Labour government since 1997, funding per student has been less than under any of the 18 years of Conservative government that he previously condemned.

Patrick Hall: I do not accept that.

Tim Collins: It is true.

Patrick Hall: I did not refer to 1997, but was referring to recent years—[Interruption.] It is interesting that the Conservatives are allowed to ruin the economy for 18 years, but that a Labour Government take a lot less time than that to hold the situation and then to change it into a position of sustained, real, year-on-year investment increases in the public services. That is beginning to happen in the higher education sector. In the current spending review period there has been real growth of more than 6 per cent. That is not a cut or a decrease—we are now able to sustain growth. There has been an additional £3.7 billion during the spending review period. However, as I keep saying, we acknowledge that that is not enough, and that we need to do more. The proposals to introduce variable fees are intended to be additional—neither a substitute nor an excuse for reducing the contribution by Government grant or the general taxpayer.

Mark Francois: The hon. Gentleman has just contradicted himself. A few moments ago, he said that the money was intended to be additional, but he admitted to me about 10 minutes ago that he had no guarantee that that was the case.

Patrick Hall: The hon. Gentleman perhaps was not listening, or is a little over-enthusiastic. The Government's commitment is that they will not use the introduction of variable fees as an excuse or a means to reduce the mainstream commitment from the general taxpayer. Whether there are guarantees lasting for 100 years is a different matter—we deal with the reality and the practicality of government year in, year out.
 It is right that society should fund higher education to a significant degree, as it does, because society benefits from having graduates, qualified doctors and nurses, teachers, engineers and even lawyers. It is therefore right that society should invest in higher education. The economy benefits from that and the Dearing committee described it as a social rate of return, which is defined as a return to taxpayers for their investment in higher education and is measured by the economic growth associated with and created by graduates. Dearing identified that social rate of return as between 7 and 9 per cent., so it makes sense for society to make a major contribution. 
 Equally, it makes sense and is inherently fair for individual graduates to make an extra contribution, because graduates benefit from what some have called a private rate of return, which is the rate of return associated with higher wages over a working lifetime. There is no doubt whatever that on average graduates earn considerably higher wages than those who are not graduates.

Phil Willis: This is a fundamental issue. Would the hon. Gentleman be gracious enough to accept that the huge graduate premium is something of a myth? If one compares graduates with all other non-graduates, one arrives at the figure of £400,000 that was mentioned earlier. However, if one compares graduates only with people who have two A-levels or a level 3 qualification, the figure is some £120,000. When one subtracts from that £50,000 for loss of earnings during a graduate's training, the figure is relatively small. Does the hon. Gentleman accept that?

Patrick Hall: No, I do not accept that. I refer the hon. Gentleman to appendix 6 of the House of Commons Research Paper on the Bill, on page 58, where there is a table on salary comparisons among graduates and groups of non-graduates. That table gives details on all groups between the ages of 21 and 60. People with no qualifications receive £289 a week on average, whereas people with an A-level or equivalent receive £405 a week. For people with a degree or the equivalent, the figure is £605 a week.
 Those are averages, and of course there are earnings above and below those figures. Under the proposals, graduates who earn well below the average or who do not work for all their working lives for various personal and family reasons will have their debt wiped out after 25 years. All sorts of people are accounted for, but there is no denying that graduates get an excellent rate of return for their investment of time and effort, although of course they forego wages while they study and must repay tuition fees and maintenance grants. 
 That private rate of return has been shown to be as much as 15 per cent. for male graduates and 30 per cent. for female graduates, which, along with the 7 to 9 per cent. rate of return for society as a whole, suggests that it is entirely fair and affordable for graduates to make a direct contribution themselves. That is seen to be so in many parts of the world, not just by those of us who support the Bill.

George Mudie: If universities need more money, as is accepted, and the answer is that students should make a greater contribution—that is part of the answer—perhaps the more pragmatic approach would be to ask why that must be variable. Why is it not possible simply to raise the level of student contributions, as we did in 1998?

Patrick Hall: It is perfectly possible to do what my hon. Friend describes. I shall explain why variable fees are important for other reasons, but he is absolutely right. The money could be raised by increasing a flat fee.

Graham Allen: Does my hon. Friend accept that a student, regardless of income, is not making a greater contribution than Dearing or anyone else? It is a graduate earning at least £15,000 who may or may not make a contribution. I hope that point helps my hon. Friend the Member for Leeds, East as well.

Patrick Hall: That is the central reason why I tried to prompt discussion on the social and private rate of return. Graduates are in a much stronger position to contribute to society as a whole and to have better quality lives. The issue is not just about money, but about health, outlook, self-confidence and the ability to benefit in many ways from such an education. We are trying to help more people get those benefits for their sakes and ours, and that is what the Bill is all about.
 It is fair to suggest that those who will generally be in a much stronger economic position should make a personal contribution to that outcome. What is not fair is to abolish fees altogether and return to a situation in which the taxpayer is supposed to fund everyone—which has never actually been done—and provide a free education. In that system, the better-off students are subsidised by lower income groups who pay tax but do not participate in university to anything like extent that they should. That is not a situation to which we want to return. 
 I was asked why we need variable fees, and the point is constantly made that they will lead to a two-tier system in higher education. However, there is already a multi-tiered system in higher education. Universities have the freedom to set their own fees for part-time and postgraduate students and international students from outside the European Union. Taken together, those three groups add up to more than half the students in higher education in this country. We are putting a lot of time and energy into talking about a number of students that may be significant, but is by no means the majority. The current system also entails differentiation of funding. Under the current bloc grants, different courses are funded to different extents by the taxpayer. 
 It has been suggested, including several times in Committee, that a few so-called elite universities would charge £3,000 for all their courses while other universities, which no longer call themselves modern universities, although I have forgotten their new title—

Graham Allen: Non-traditional universities.

Patrick Hall: I will try to avoid using that term.
 Some people have suggested that the other universities will have to charge less, because they will not be able to attract students if they charge £3,000, and will be regarded as academically inferior as a result. Both Universities UK and the Select Committee on Education and Skills anticipate that all universities will charge £3,000 for some, or even most, of their courses, with variability applying more among courses than among institutions. I have not carried out a massive survey, but I have spoken to the vice-chancellors of De Montfort university, which has a base in Bedford, and Luton university, which my constituents also attend. Both are confident that they intend to charge £3,000 for many, but not all, of their courses. 
 It is important that the universities have the freedom to charge less for certain courses according to local conditions. Fees should be set not only with regard to national strategic priorities, which we have heard discussed today in relation to mathematics, but with regard to local conditions that the centre could not know about. 
 An institution may want to stimulate demand for certain courses for which enrolment has fallen and which may face closure. The hon. Member for Newbury referred to that, saying that the Bill will mean that universities are more likely to close. In fact, they are more likely to be able to avoid closing or shutting down certain courses. If we view the situation from a narrow accounting point of view, we will lose out on the breadth of education that a civilised society surely wants to enhance. As such, the ability to be flexible could help. The loss of physics has been mentioned. It may make financial sense to an individual institution to close down a course—physics or whatever—but that would be a loss to society as a whole. Variable fees may help to address that situation.

Kali Mountford: My hon. Friend is making some excellent points about the purpose of discounting courses. Would he also consider new courses? That might be a subject new to that university or a subject that has not hitherto been tested to degree level. Discounting might be a good way of introducing such new degrees. Is that not a good way of expanding education?

Patrick Hall: That may well be the case. It is for the universities to explore. They will be given the tools and means to do that through the system that we are discussing today.
 I should like to make a few comments about the market. I shall not go into detail, as you would rightly not allow that, Mr. Hood. It is argued that there is something twisted about what is being proposed, because it introduces a market. In theory, a market allows people to charge what they can get away with to meet a demand, taking into account all their costs and so on. But that is not the situation in higher education, and it will not be the situation in higher education if the Bill is enacted. If there is a market, it is an imperfect market. It is a restrained and contained market. Indeed, if universities are able to charge zero or fees 
 lower than the market price—which they could under the proposals—it is a very warped market. People should not get so hung up on that concept. 
 The other reason why variable fees are so important is that in order to charge more than the current level of tuition fee—to charge up to the proposed cap of £3,000— the higher education institution will have to come to a five-year agreement with OFFA. That is crucial to addressing the widening access agenda, which we have never had and have never attempted in this country.

Jimmy Hood: Order. The hon. Member is now moving into the next group of amendments. I ask him to return to the current group.

Patrick Hall: I shall certainly do as you request, Mr. Hood.
 Variable fees and OFFA are hooked together, in a way. Perhaps I will expand on that point later. The leverage opens up the opportunity that my hon. Friend the Member for Nottingham, North mentioned earlier.

Simon Thomas: I am intrigued by one aspect of what the hon. Gentleman says. Although I disagree with him fundamentally about the market in higher education, the logic of his argument is that the cap in the Bill is worse than useless and is an obstacle to what he would seek to achieve through variable fees. Could he explain why there is a cap in the Bill until 2010 if that is not simply a political fix? His analysis suggests that there is no need for a cap and that higher education would benefit from not having one.

Patrick Hall: We are talking about variable fees, and the cap is a part of that. I am amazed that the hon. Gentleman draws such a conclusion from what I said. The ability to charge variable fees has advantages, as I am trying to explain, but that does not mean that those fees should operate as though in a totally free market, with some of the Oxford friends of the hon. Member for Newbury being able to do what they want. I entirely disagree with that. It is not a political fix; it is a question of reality and fair access. A high fee will of course deter students. However, a fee of £3,000, in the context of repayments that will be lower than they are now and of the most generous form of loan possible, is a good deal.
 I shall cite a local example to show why I believe that the idea of a higher flat fee, which is promoted in some amendments, should not be supported. Roughly 85 out of 400 students at the Bedford college of further education are full-time and study HND courses franchised by De Montfort and Luton universities and under one of the national awarding bodies. Full-time students pay the current tuition fee, although many receive full fee remission. 
 Some of my colleagues say that debt aversion is an important factor, although a number of hon. Members have shown that that is debatable. I ask those who support the idea of a flat fee rather than a variable fee what they think the effect on young people of an 
 annual fee of £2,500 or £3,000 would be. Would they be encouraged to go to university or discouraged from going? To allow De Montfort and Luton universities to charge lower fees to attract people and fulfil their obligation with OFFA is another strong argument in favour of allowing variable fees instead of a high flat fee. 
 In conclusion, the more that I have examined the matters, the more it has become clear that variable fees are crucial to increase the funding for higher education, to increase capacity, to improve the quality and quantity of teaching, and to remove the barriers to access to higher education. Those barriers have been crumbling over the decades, but there is strong resistance from about 30 per cent. of society, among whom access has never been considered a right. The Bill provides the means to address that for the first time in the history of the country. It gives more freedom and flexibility to address local variations as well as national strategic matters. It will enable everyone who has enough ability to access higher education, whatever their background or walk of life. That would be good for them and good for the country.

Chris Grayling: I want to put on record four factual matters for the Committee to consider before the debate ends. I have listened carefully to the comments of the hon. Member for Bedford (Mr. Hall). The most recent report from the Department for Education and Skills and the submission provided by Universities UK make it clear that since 1998, when tuition fees were introduced, and since 1997, when the Government came into power, the funding per student provided by the Government has fallen by approximately 10 per cent. Even when the additional funding raised from student contributions is taken into account, the funding per student available to universities in real terms has remained flat. It is a matter of record that a claw back has taken place.

Alan Johnson: Will the hon. Gentleman accept that a large part of the reason for the reduction in the per capita student funding is the move from grant to loan, which his Government started and we finished? Secondly, will he accept that that decline has been stopped and, over the three years of this spending review, funding per student will increase—the first time that that has happened for many years? As I am recognising the points that he makes, will he recognise the points that we make?

Chris Grayling: In real terms the decline has continued up until the most recently completed financial year. The estimate for 2002-03 is the most recent tax year contained in the Universities UK submission, to which I refer and which I have in front of me. I do not have the Minister's end-of-Parliament report to hand.
 My point to the hon. Member for Bedford is straightforward. Before 1997 the Government said that they would not introduce tuition fees. They then did, and clawed the money back. Before 2001 the 
 Government said they that would not introduce top-up fees. They then did, and do we believe that they will not claw the money back now? I am not prepared to accept their assurance.

Alan Johnson: It is the second time today that it has been said that we said we would not introduce fees and then did. The 1997 Labour manifesto, ''Higher Education'', said:
 ''The improvement and expansion needed cannot be funded out of general taxation. Our proposals for funding have been made to the Dearing Committee, in line with successful policies abroad''— 
end of story. There was no such commitment in our 1997 manifesto.

Chris Grayling: It is a matter of record that the Prime Minister himself publicly said that he had no plans to introduce tuition fees. Perhaps we should not have taken the Prime Minister at his word. Is the Minister saying that we should not have taken the Prime Minister at his word in the 2001 manifesto when he said that he would not introduce top-up fees?

James Clappison: May I assist my hon. Friend with something even more up to date than that? Just before the last general election, when Ministers were saying not only that they did not intend to introduce top-up fees but that they were unnecessary, the then Minister with responsibility for higher education said:
 ''The Government's position on 'top-up' fees is clear—we are opposed to them and have legislated to prevent universities from levying such charges. Nor are 'top-up' fees necessary.''—[Official Report, 16 January 2001; Vol. 378, c. 173W.] 
He went on to claim how much the Government were giving to universities.

Chris Grayling: The simple message to vice-chancellors is that the Government have form when it comes to clawing back fees. They cannot be confident that if this measure goes forward they will end up with extra money. They cannot be confident that the Treasury will not seek to recover that money.
 My second point is international comparisons. When I commented that we have a higher rate of participation than most of our major industrial competitors there were snorts of derision from those on the Labour Benches. I choose my sources carefully. It is a matter of record in this country that we have a higher level of participation in higher education than any other member of the G7 nations. It is a matter of record that we have one of the highest levels of participation in the EU—my source is the DFES.

James Purnell: Does the hon. Gentleman also acknowledge that we have had a higher level of economic performance than any other G7 country over the last year? Does he want our economy to be more like those of Italy, Germany and France? That would be a departure for Tory Front Benchers.

Chris Grayling: I would not accept that over recent years we have always had a higher level of economic success. These things certainly cannot be picked from a single year. The simple fact is that we have a higher
 participation rate than the United States, Japan, Italy, France or Germany. That is a matter of record, according to the Department. That is something that we should consider seriously.
 The third point is the demographic changes. Various hon. Members have made reference to the Higher Education Policy Institute's comments about demographic change in higher education. I will make two quick points about that. I challenge those figures, and I have challenged them with the HEPI. There are some false assumptions in the work that it has done, particularly in the choice of the student cohort on which to base the increase. The Government's own figures are for a student cohort, a fee-paying cohort, of 750,000. The HEPI figures are based on a student statistical number of 1.3 million, so there are, in my view, flaws in those figures. 
 Most particularly, the demographic changes to which hon. Members have referred occur during the first half of this decade, not the second half. By the time we get to the end of the decade, we are heading into a decline in the number of 18 to 21-year-olds, which will manifest itself more immediately in a decline in the number of secondary school pupils. These are demographic blips. I challenge the statement that there will somehow be a great avalanche of new students in future who will require substantial extra long-term funding.

Jonathan R Shaw: The hon. Gentleman has referred to the number of students in higher education and made comparisons with other G7 countries. Does he agree that within the Organisation for Economic Co-operation and Development, we have the fourth-worst staying-on record post 16? Labour Members want to do something about that and have done so, not least by introducing the education maintenance allowances, which have led to increases of 6 or 7 per cent. in the numbers staying on. That is another factor that will mean that more young people get to A-level and want to go on to university.

Chris Grayling: I do not want to tread too far down that road, although the hon. Gentleman describes the real weakness in our education system, which is conspicuous by its absence from the Government's thinking. The provision of good vocational education is the dimension that is missing from our system.

Phil Willis: The hon. Gentleman makes an important if barbed point. In the review of Conservative policy that is to take place, will he address two things? First, will he note that a vocational offer is not cheaper than a higher education offer? Secondly, will students who do not go to university but who have a good vocational offer be fully funded under his policies, and if so how?

Chris Grayling: The hon. Gentleman tempts me to launch into a discussion of Conservative policy. I can assure him that when we publish our policy, he will be immensely jealous of it, as it will be much more attractive than the one that either he or the Government propose.

David Chaytor: When the hon. Gentleman publishes his policy, will it provide that all the new vocational courses that he proposes will be subject to fixed fees?

Chris Grayling: Again, I do not want to trespass too far down that road, but the issue is interesting. I received a written answer about it last week. The average fee charged to a student in further education today is £135. The average fee that the Government propose to charge a student in higher education is likely to be close to £3,000, so we are not talking about anything approximating to comparable levels of financial commitment.
 My final point relates to the student loan system. I was concerned by the comments from the hon. Member for Nottingham, North, who did not completely understand that although there are loans that are used to pay fees, loans to repay fees subsequently and loans to cover student living costs, when students graduate, they just have one debt that has to be paid off over a period of years. 
 Now, the average student loan is just under £9,000. By about 2009, when this system is intended to be fully in place, that figure would have risen in cash terms to just over £10,000, but if these measures are introduced, the average student loan will be not £10,000, but £19,000. Even for the less well-off students that the hon. Gentleman described, the figure will be £10,000, because although they are given £3,000 for living costs, they have to pay off the £3,000 in fees. I am talking about the practical reality of the amount that students from the least well-off third of the cohort will owe at the end of their course. 
 To summarise, under the current system, the debt for those students is £10,000, and after the introduction of the Government's proposals, it will still be £10,000, so their commitment after university remains the same. But let us consider young people whose parents are just a little better off. I am not talking about wealthy people. The parents may be a primary school teacher and a part-time classroom assistant, and their income may be just over the £32,000 limit. The bill for that family—[Interruption.] The hon. Member for Chatham and Aylesford does not believe me, but a primary school teacher earning £25,000 or £26,000 a year after some years in the profession together with someone earning £8,000 to 
 £9,000 a year as a part-time personal assistant will have a combined income of between £33,000 and £35,000. Their children will have to pay the full amount, and their debt will rise to £19,000. 
 Hon. Members seem to believe that graduates do not pay anything until they reach a particular level of earnings. Let me disabuse them: this is a deferred interest scheme. It is not a free scheme where one does not have to pay anything until one reaches a certain earnings level. It is rather like those special offers that say, ''buy now, pay September''. One ends up paying the interest in the end; one just pays it later. So for each of the five years that it may take a graduate to reach the £15,000 threshold, the interest on the debt, which is 3.1 per cent. this year, will be added to the amount owed. That is the reality of the system. Hon. Members should not be under the misapprehension that somehow this is a free system until one reaches a certain level of earnings: it is not.

Tim Boswell: Does my hon. Friend agree that if hon. Members were disposed to look for relief for the loan in terms of loans being written off after 25 years, and that were to happen extensively, the Chancellor of the Exchequer would be very concerned about the overall cost of the scheme, because we would be making its overall resource implications even less attractive to him?

Chris Grayling: My hon. Friend makes an extremely good point.
 I conclude with a simple statistic. I have carried out a great deal of work on modelling the impact of top-up fees on individuals in vocational graduate jobs; for example, radiographers in the NHS and political scientists. Under the current system, a radiographer coming out of university and going to work in the NHS would have to repay around £12,500 to pay off their loan in full, taking into account the repayments of principal and interest payments. Under the Government's proposals, the amount to repay, including interest and principal, will rise to £26,500. If that is not a deterrent, I do not know what is. 
Further consideration adjourned.—[Derek Twigg.] 
 Adjourned accordingly at twenty-eight minutes to Six o'clock till Thursday 26 February at ten minutes past Nine o'clock.